Dr. Kirill Kretov about Reporting Capital Strucutre
Every organization possesses multiple types of assets, which it combines to produce goods and services. The objective of this section is to classify these assets based on their common attributes.
All assets can be divided into two major types. The first type incorporates conventional assets that can be touched, sensed, and felt: these are known as tangible assets. Any asset that does not fit the above description can be categorized as intangible. According to IFRS (IAS-38 Intangible Assets, Issued in September 1998, revised in January 2008.), an Intangible Asset is an identifiable non-monetary asset that does not have physical substance. An intangible asset must be identifiable, a requirement that distinguishes it from goodwill.
Tangible assets are usually associated with intangible assets, as represented in the diagram by the overlap between the two major categories. For instance, when an organization produces physical commodities, it will usually have some form of intellectual property (IP) associated with and involved in the manufacturing process.
Most physical products, however, cannot be patented in their entirety. For example, a notebook computer manufactured by Sony may include not only a patented CPU cooling technology, the Sony brand name, and the VAIO trademark but also a Blue-ray player, which relies on technology developed and patented by the Blue-Ray Disk Association (BDA). Similarly, automobile industry giants like BMW incorporate components, such as GPS systems and MP3 players, that are patented by other organizations.
On the other hand, an organization can also possess intellectual property that has not yet been employed in any manufacturing or production process. For example, General Motors maintains an extensive portfolio of inventions and licensed intellectual property in addition to its vast array of trademarks and patents used in current product offerings. Thus, an overlap between tangible and intangible assets does exist but is only partial.
Furthermore, the diagram also includes financial assets, which are intangible by definition. Cash and its equivalents are not real property, because cash needs no valuation; however, it can still be secured by physical assets. For this reason, the diagram illustrates a partial overlap between financial and tangible assets.
J. Cohen proposes that Intangible assets can be categorized into two distinct groups, identifiable and unidentifiable. In addition, intangibles (or proto-assets) share some of the attributes of identifiable and unidentifiable assets but do not fit neatly into either of these two categories. Here we see the difference in opinion about the essence of Intangible Assets. From an accounting standpoint (i.e., for the IFRS), an IA is an identifiable non-monetary asset, but J. Cohen states that the IA may be further split into identifiable, unidentifiable, and proto categories. Those who begin to explore this field farther will see more serious disagreements among researchers regarding terminology and concepts. In my opinion, an asset should be called by a name recognized by accounting practices: if it is not recognized but is clearly identified and valuated, then it is an asset. Thus, what J. Cohen refers to as Intangible Assets, I would refer to using a term like “a global field of intangibles.” (“Intangible Assets” in the broad sense (and in the sense of goodwill and Intellectual Capital) refers to “Global Field of Intangibles.” This includes everything (e.g., non-material and un-identifiable assets, goodwill, and intellectual capital).)
Dr. Kirill Kretov about Reporting Capital Strucutre
Present article is part of Doctorate Thesis written by Dr. Kretov Kirill (Master of Arts in Human Resource Management, and Doctor of Business Administration), Geneva, Switzerland, October 2009.
Dr. Kretov Kirill on Intangible Assets 