Smarter Companies Use the Right Information Set

In recent weeks I’ve been getting ready for an exciting session on Accounting for Intangible Assets at SIBOS 2013 in Dubai next month. Working with the team for the Innotribe track has been amazing. They are helping me fine tune our ICounts open source exercises in a way that will help the bankers in the room understand the intangibles that are so critical to smarter companies.

These intangibles are mostly invisible today. That’s because the dominant information sources used today are the financial statements which were optimized for the tangible world. Financials are still important. But because they barely get at the intangibles, there is a need for a new information set. Our term for this new approach is ICounting.

 

The basic steps are the same in both systems: inventory, classify, measure and consolidate. But the focus is very different. Here are the basic steps in the two systems:

Activity

Accounting

ICounting

1-Inventory

Owned tangible assets

Networked intangible assets

2-Classify

Inventory, Equipment, Buildings, Land

Human, Relationship, Structural and Strategic Capital

3-Measure

Monetary cost/value

Stakeholder value

4-Consolidate

Balance Sheet

Graph

Everyone in business has a basic understanding of the accounting steps outlined here. But very few have translated them to the intangibles side of business. There are lots of smart companies around today. But they are figuring this stuff out on their own using gut feel and intuition. Given the fact that up to 80% of the corporate value is intangible in economies like the U.S., it creates a lot of unnecessary risk and blinds people to greater possibilities. Is that the best we can do?

We think we can do better. That’s what we’re up to at Smarter-Companies. And that’s what I’ll keep talking about at tomorrow at IPR Plaza and at Sibos. I’ll share more in the coming weeks but the best way to experience these ideas is to be there live. Hope you can make it!

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