Intangibles, the Bottom Line and Shareholder Value
U.S. business culture is very much about results. Two of the ideas that best capture this perspective are the concepts of the “bottom line” and “shareholder value.” The bottom line is a financial calculation. As we have made clear throughout this book, the integrity of financial statements that are used to calculate the profit or [...]
Remembering the traditional balance sheet: a wonderful, but outdated, tool (in its current form)
The roots of the balance sheet go back to 15th century Venice when merchants were building trading businesses that spanned the globe. They developed ways of keeping records for their businesses. These emerging practices were recorded by a monk named Luca Pacioli and his treatises became the foundation of the balance sheet and income statement [...]
Will Intangibles Ever Go on the Balance Sheet?
This week, we’ve been talking about collecting data on intangibles investment. This discussion seems to beg the question of how it will be used. In contemporary accounting, the investment by an organization in tangible assets is “capitalized” on the balance sheet and depreciated over time. This serves as a way of keeping non-operating expenses (that [...]
Analyzing I-Capex: How to understand the return on your intangible capital expenditure
This is a follow-up to yesterday’s post about intangible capital expenditure. When you are starting out, an i-capex report will just be a separate report in your accounting system or in a spreadsheet to be used to report to management or your board of directors. Ideally, you should go back a few years so that [...]
On the Value of Intangibles (and why that’s the wrong question)
The measurement of intangibles tends to create a lot of confusion. That’s because there are a number of ways of measuring them and they all get jumbled together. If you look at my last post on intangibles spending, you’ll see a real mixture of metrics. Some of Nakamura’s estimates looked at categories of “spending.” But [...]
I-Capex Is the New Capital Expenditure
Capital expenditure (capex) is an accounting concept that has ingeniously supported the tangible economy for centuries. It allows a company to apply to its balance sheet the cost of investments in its future productive capability. This is called “capitalizing” an expense. Then the cost of this investment or capital is depreciated over a period of [...]
New Superpowers – Emerging Frontiers for Process
This week I have been talking about structural capital–the superpower of today’s organization. And process is one of the most important and least understood in terms of its importance and its sustained value to an organization. Most internal processes in today’s organizations already have been automated to one degree or other. There are software programs [...]
