Intellectual Capital: A Corporate Asset

From the Paper:

"The Financial Accounting Standards Board (FASB) defines an asset as having three essential characteristics: (1) "probable future economic benefit", (2) "exchangeability", and (3) "the entity's right to control-ownership". The relevancy of the asset in generating corporate revenue determines if the asset is tangible or intangible and therefore dictates its place on the balance sheet. Corporations increased emergence in global economic activity and technology has compelled corporations to re-evaluate the importance of human intelligence/knowledge and its impact on revenues. This new awareness has resulted in corporations investing substantial capital in human resource activities such as training and development, retention, and recruitment. Corporate decision-makers and investors argue than human capital investments are directly related and essential to the organization's income producing ability. Therefore, these investments should be recorded as assets on the balance sheet. Corporations considering mergers or buy-outs place considerable credence and relevancy on the "soft" or "intangible" assets of an organization. Intangible assets are crucial in aiding investors or decision-makers in evaluating the profitability and performance of operations and for futuristic planning. Investors no longer rely solely on the financial statements of corporations and the absolute values therein to determine or gauge corporate wealth and corporate performance. This revolution deems current generally accepted accounting principles invalid and outdated by corporate standards."

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