Value and Intangibles 2 – Accounting and Alchemy

This is the second of our January posts exploring the value problem.   It’s a problem that affects me, you and Wall Street too...

Many of our readers and contributors will be familiar with why intangibles are so hard to account for.   It’s an issue that goes to the heart of the accounting methodologies used around the world today.   These are predominantly based on the double entry bookkeeping system.

Utilised perhaps as far back as the 12^th Century BC, double entry bookkeeping was designed to capture financial transaction flows.   However, internally developed intangible assets can rarely be described in a transactional way.   They are usually developed over the course of a long and involved timeline.   There are very few points along that timeline at which you can take an accurate value snapshot.

There are two fundamental ways to respond to this:

IP Ownership - is it really all that it's cracked up to be?

When negotiating a collaboration agreement, one of the issues that often causes a headache is who is to own the IP.   In many cases, it is a debate that doesn’t need to happen.  As we saw a couple of weeks ago, this issue can be so divisive that the negotiating parties lose perspective and fall into the joint ownership trap.

Tracking Innovation

One of the questions we like to ask IP Asset Managers is what sort of system they have in place to help them with their job.   Is it a reactive system?   Do they rely on their innovators to disclose what is being created, or do they have a more proactive system that tracks innovation from the outset?