Abstract
The revised definition of an asset by the FASB and GASB gives way to the recognition of the fair value of another off-balance sheet value. Interest in recognizing intellectual capital as an asset of the organization has grown out of dissatisfaction with traditional financial accounting and reporting directed toward manufacturing, trading of goods, and service activities which ignore the organizational asset values based on knowledge, expertise and technology. The growing interest in intellectual capital (IC) and knowledge management reflects an awareness of the need for identification, utilization, and measurement of an organizations most valuable asset. This paper identifies the importance of the IC value, discusses the research emphasis placed on it by others, and develops a fair value measurement model. The model provides a basis not only for identifying crucial aspects of effective knowledge management, but also for emphasizing the interdependence, and the synergy that may be created through recognition. Measurement techniques are presented together with a process for stakeholder communication that establishes the groundwork for future empirical investigation and analysis.
Highlights
A s business and other competitive enterprises become increasingly internationalized, competitive advantage based on traditional capital-intensive assets may become marginal
Does it recognize the importance of identification, measurement, and valuation, it emphasizes the strategic importance of evaluating the entire system by the components
An Internal Revenue Service (IRS) Ruling describes a process for estimating the value of goodwill for a variety of purposes
Summary
A s business and other competitive enterprises become increasingly internationalized, competitive advantage based on traditional capital-intensive assets may become marginal. The assembled workforce value is the result of past and future transactions between the company and its employees This is not unlike other assets that entail future obligations for the company to maintain control of the asset, such as goodwill. This investment requirement could be viewed as a series of required future transactions between the company and the external market Despite these similarities, goodwill is a recognized asset under Generally Accepted Accounting Principles, whereas the assembled workforce is not. Goodwill is a recognized asset under Generally Accepted Accounting Principles, whereas the assembled workforce is not Both the Financial Accounting Standard Board (FASB) and Governmental Accounting Standard Board (GASB) have adopted fair value recognition as part of Generally Accepted Accounting Standards (GAAP) (FASB ASC 820, 2009; GASB, 2013). A means to communicate the reality of IC to stakeholders is presented together with concluding remarks
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