The missing trillions: valuing intangible assets

13 Mar 2019 3:51 PM | Rebecca Caroe (Administrator)

By Paul Adams, CEO EverEdge Global

According to a recent report from the UK Treasury, the world’s five most valuable companies are together worth £3.5 trillion, yet their balance sheets report just £172 billion of tangible assets. The other £3.3 trillion of value is missing in action.

Imagine if the directors and management teams of these five companies chose to only actively manage the 5% of assets recorded on their balance sheets. They would be ignoring the key driver of 95% of corporate value their intangible assets and critically failing to fulfil their fiduciary duty to manage all their company’s assets.

It seems almost inconceivable that directors and management would not actively manage their valuable intangible assets, but we see it happening everyday albeit to varying degrees, ranging from merely failing to actively recognise these assets to outright denial they are even relevant. A large driver for this is that accounting standards like GAAP or IFRS were essentially designed for an industrial age economy and consequently they almost completely ignores intangible assets, lumping them under the amorphous term “good will” or recording them solely at cost.

When and why should you value your intangible assets?

Read the rest of Paul's article.