What do intangible assets really measure
Measuring and controlling intangible company values - Part 2
01/19/2009 | What are intangible value drivers and how do they contribute to company value?
by Prof. Dr. Roman Stoi, Stuttgart
In the first part of the article (BM 08, 322) the different types and characteristics of intangible assets were presented. It became clear that these assets are only partially visible in the external accounting. For a targeted control and design of the intangible assets, an additional internal measurement and evaluation is necessary. The current possibilities and limits of the existing procedures are presented in the second part. In addition, it is also shown what role these intangible assets play in creating value in a company and how they can be used in a targeted manner to increase value.
1. Procedure for internal measurement and evaluation
The different assessment methods for intellectual capital can be divided into four groups (based on Galli / Wagner, 2006, p. 1531 ff.):
- Cost approach: The valuation is based on the costs of (re-) production or (re-) procurement of the intangible assets. To do this, all intangible assets must be identified and individually assessed with their costs. This valuation approach quickly reaches its limits, as an objective cost determination of individual intangible assets such as a customer relationship or the management quality is hardly feasible. The clear allocation and quantifiability of the cost components also proves to be difficult in practice.
- Income approach: The focus is on future payment surpluses or profit contributions that will be achieved through intangible assets. Their present value represents the value of the intellectual capital. These methods are therefore based on investment calculation and company valuation. However, their good traceability is offset by the methodological diversity and complexity as well as the high degree of subjectivity in the interpretation of the results. In addition, there is the limited ability to predict payment surpluses and profit contributions as well as their inability to allocate them to individual intangible asset components.
- Market-oriented procedures (Market Approach): The value of individual intangible asset components is compared with the assets traded on the market and, if necessary, corrected with company-specific multipliers. However, there are only a few comparable intangible assets on the market and the relevant information is mostly not accessible. Other market-based methods interpret the difference between the market and book value of listed companies as the value of intellectual capital. Although the market value includes intangible assets, since it is based on the future expectations of investors and often on speculative considerations, such an interpretation is questionable. Nor can it be assumed that external investors have the information they need to realistically assess the company's intangible assets. In addition, due to extensive accounting options, it cannot be assumed that the book value corresponds to the actual value of the tangible assets.
- Scorecard procedure: In the three categories of procedure mentioned above, an attempt is always made to determine a monetary value for the intangible assets. However, there are general problems of quantifiability, attributability and subjectivity. In addition, they do not contribute to the planning, management and control of the intangible assets. The scorecard procedure therefore does not include a monetary assessment. You first identify and classify the individual intangible assets in order to then measure them quantitatively with the help of multidimensional indicators. Although the methods also contain financial parameters, they are not suitable for determining the monetary value of intellectual capital. Rather, they impress with their practicality and focus on the management of intangible assets.
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