Case Study on Measuring Intangible Assets – Indian Experience - 1 -
BEYOND BALANCE SHEETS…
Measuring Intangible assets- an Indian case study
“Just as you can't measure what you can't describe, you can't manage what you can't measure...” While many companies have strived to differentiate their annual reports and make them informative, attractive and easy to read, most still take a rear-view-mirror approach, focusing almost exclusively on history and analyses of past performance. But in today’s world, as we have advanced into the Information Age, more companies will find that those assets most easily measured are not necessarily most valuable; increasingly they will be forced to measure intangible assets in a predictive way that is more reflective of how the company is actually run. Today, even traditional manufacturing companies are finding themselves not simply selling a product, such as a car, but selling customer service, a lifestyle, convenience, and so much more. If we take the example of airline industry, it also provides another clear example of this phenomenon. Where airlines once had large tangible inventories of aircraft on their books, they now lease the equipment, changing the nature of the business to one built on intangible assets - landing rights, booking systems, customer service, and brand. Unfortunately, knowledge itself cannot be "managed." But knowledge that is captured and converted into an asset (tangible or intangible) is indeed a commodity one can count on, literally, to improve the performance of the company and help generate profits. No company can own either of the critical assets, neither the employees nor the customers. The value they provide to the company is only temporary and cannot be considered a measurable asset unless it is captured and converted into something the company can own - any new knowledge or skill that can be reused or applied in other areas, be it a new learning process or a new operating policy. There is a three grid system in any organization that can be measured as intangible assets. They are Customers, People and organization. Customers People
Adopted from: www.celemi.com
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However, there are also factors that may be revised during the years, such as certain investments and initiatives we need to focus on as they are implemented and developed. For example, the development of our IT capabilities, which at one time was a key measure when establishing new offices, is now monitored in relation to other investments in R&D and marketing. In the future, we expect other factors will periodically be measured to give an accurate assessment of our intangibles as the business evolves. Before any company starts measuring their intangible assets, everyone has to be helped to understand what their intangible assets are, and what impact they have on the performance of the company. With this knowledge of the "big picture," employees can begin to see how individual performance affects organizational performance. For example, the managers understand the importance of assigning a new employee to a competence-enhancing client rather than an image-enhancing client. In any case, the companies should use caution before jumping in and measuring the intangible assets. First, there must be a shared understanding internally of what the intangible assets are and what they mean to the overall performance of the company. With this knowledge, people are able to interpret the information and make effective decisions in line with the strategic plan. At the same time, they are developing their own extraordinary business sense - an essential key to how companies and employees can face challenges as an innovator in a global environment. Reasons of initiating Intangible asset measurement
The pressure for more disclosure is already significant. A growing number of academics, consultants, and regulators see the lack of information on intangible...