Remembering the traditional balance sheet: a wonderful, but outdated, tool (in its current form)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 [...]
Intangible Capital Expenditures: How to track your annual i-capex
Last week, in my interview of Alan Anderson and Chuck Hulten on accounting and intangibles, Alan made a statement that has stuck with me: That in all his travels in his own business and through his activities with the AICPA, he has never heard people say that they use their GAAP statements to make business [...]
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 [...]
Why Are Intangibles Not On the Balance Sheet?
Up until the 1970’s, the consumers of financials—managers, analysts, investors and bankers—had a much easier job. They had three sets of information by which to measure their investments. Balance sheet. In those days, balance sheets did include all the important assets of a corporation and looking at the balance sheet gave you a good idea [...]
The New Accounting
The accepted wisdom inside the IC world is that we should ignore accounting and accountants—they will never “understand” what we are doing. I went along with that for a number of years, accepting the view of many that IC is special, it cannot be truly measured, that it must be appreciated. Well, I am way [...]
Modelling the IC of Google’s search business
Google’s search business is a great example of a knowledge factory. While it is driven by highly complex math, the business model developed a decade ago is very simple. It all started with the competencies of two computer science graduate students at Stanford, Sergey Brin and Larry Page. The year was 1995. Page was looking [...]
Why visualization is so important for intangible capital
One of the big reasons that folks don’t do more explicit thinking about intangible capital is that they have no frameworks or mental models about IC. We see this disconnect in a lot of businesses. Just about every manager knows that our economy has shifted. They know that knowledge is an important driver of their [...]
