Invisible Value

            Intangible assets cause a lot of controversy in the accounting world. Why are they not on the financial statements? How do we keep track of their value? The following will explain these two questions; intangible assets can’t be measured accurately, and where is their value hidden.

            Why are intangible assets not on the financial statements? The truth is, the true value of each intangible asset is hard to know. A company’s name makes a big impact on the amount of sales a company has, but it is hard to know exactly how much that company’s name is worth. An accurate way to record the value of intangible assets on the financial statements does not currently exist. According to Ronald Bailey (2007), intangible capital is about 77 percent of the world capital today. How do we keep track of all that value?

            The stock market shows how this value is still important for the consumer and is recognized, even though it is not in the financial statements. Dr. Doyle, professor at Utah State University, explained that investors buy stock at a higher value than the company’s book value. That means more value is recorded than the tangible assets a company has (J. Doyle, personal communication, September 30, 2014). The stock market keeps track of this value for the investors; however, it still doesn't capture the whole 77 percent.

                The value of intangible assets is there and everybody knows it. There isn't an accurate way to keep track of them, but most of the value is represented in the value that investors purchase stock. The invisible value is there, and now we know where to find it.

References

Bailey, R. (2007). Our intangible riches. Reason, 39(4), 34-40.