Transcript Measuring intellectual Capital

Consequence of an IC-index Approach
Connecting IC to Shareholder Value
• Shareholder value = market value
• The impact of IC is stronger in
opportunities than in operations.
• The best : Balance the IC & Financial
Capital
Connecting IC to Shareholder Value
The impact of IC is stronger in opportunities:
rule of increasing return
The impact of FC is stronger in operations:
rule of diminishing return
• The best : Balance the IC & Financial
Capital
FC & IC
Efficiency
Financial Diminishing return
IC
increasing return
Accumulate Investment
Yankee case FC & IC
MV
Efficiency
Financial
IC
Accumulate Investment
Yankee Finance [Adjust]
MV
Index value
Financial
IC
Manage IC
Time
Machine ple Inc.,
MV
Index value
Financial
IC
Manage IC •Develop new product
(human capital => structural capital
•Develop new business
(structural capital => Financial capital
Time
TRADITIONAL ACOUNTING VIEW &
THE REPORTING OF IC
Conceptual roots of IC
LO
Conversation
management
Knowledge
Development
Innovation
Management
KM
Knowledge
leverage
IC
Core
Competencies
Invisible assets
Report
Narrative
Measurement
indicator
scorecards
Financial
Hidden Value
How much?
Monetary value for its IC
Three approaches to calculate a monetary value for a
company IC:
(1) the cost-based approach – determining the value of
an asset by ascertaining its replacement costs.
(2) the market-based approach – determining the value
of an asset by obtaining a consensus of what others in
the market have valued the asset at.
(3) the income-based approach – determining the value
of an asset by looking at the income-producing capability
of the asset.
Marr, Schiuma, and Neely, 2004
International Accounting Standards Board
ได้กำหนดกฎเกณฑ์สำหรับ สิ่ งที่จะเป็ นสิ นทรัพย์และสำมำรถแสดงมูลค่ำได้ใน
รำยงำนกำรเงินขององค์กร (balance sheet)
– Asset: a resource controlled by an enterprise as a result
of past events and from which future future economic
benefit are expected to floe to the enterprise
– Intangible asset: “an identifiable non-monetary assets
without physical substance held for use in the production
or supply of good and service, for rental to others, or for
administrative purpose
IC
• Most IC resources do not fulfill all of the IASC
requirements
– Company do not own employee
– Company do not have full control over employee
– Research may not be certain that a piece of technology
will generate future economic benefits
– Company do not have a full control of its reputation
• Intangible assets [IASC]: is part of Structure Capital
and exclude Relational Capital & Human Capital
Goodwill
• The excess of the cost of an acquired
company over the sum of identifiable net
assets
– Goodwill occurs when an acquisition takes
place [the price is determined, it can be
recognized as an asset in the transactionbased accounting system]
The need to start measuring and valuing IC
Valuation methods
1.Financial valuation of IC
2.Indicator approach valuation of IC
3.Narrative approach valuation of IC
1. Financial valuation of IC
1.1 Cost approach
1.2 Market approach
1.3 Income approach
can be used in combination bandwidth to
develop value of IC
IC financial valuation: 1.1 Cost approach
• Principle: Substitution & Price equilibrium
– the investor will pay no more for an
investment than the cost to obtain an
investment of equal utility
– IC price = cost to obtain that resource
– Appropriate for setting transfer price, royalty
rates, or estimate the amount of damages
suffered by infringement
IC financial valuation: 1.1 Cost approach
Flaws
– Many important factors that drive value are
not reflected in the cost approach
• The amount of benefits associate with IC
• The trend of the economic benefits
• The duration over which the economic benefits will
be enjoyed
IC financial valuation: 1.2 Market approach
• Principle: competition and equilibrium
– Free and unrestricted market
– Supply and Demand factor will drive the price
of any goods to a point of equilibrium
– ควำมต้องกำรแปรผันโดยตรงต่อรำคำ
IC financial valuation: 1.2 Market approach
• Flaw
– Can be used only if data is available
regarding the transaction of IC resources are
similar to the subject resources .
– When the resources are unique, this
approach is not appropriate
IC financial valuation: 1.3 Income approach
• Principle: anticipation
– The value of IC resources = the expected
economic income generate by the IC
resources
– Requires assumptions about the future
income that will be produced
IC financial valuation: 1.3 Income approach
• Flaw
– Require good and validly assumption about
the future income
2: Indicator valuation
• Indicator valuation can be used when
financial value of IC can not be determined
and no other direct measurement can be
found
• Indicator: a reasonably trustworthy
estimate of an unknown value [Stam,
2002]
• Using of proxy for valuation
2: Indicator valuation
Proxy valuation
– Need several indicators to cover the
usefulness of and IC resources
– Need a criteria to measure
– Difficult to judge whether the level of a
particular indicator can be considered “good”
or “bad”
3: Narrative valuation
Most annual reports contain section about
the strategy and resources of the company
[tell the stories about the intellectual
capital of the firm]
Topics are IC related
– Employee
– Process
– Best practice
– QA
– IT & ICT
3: Narrative valuation
example: the Intellectual Capital Statement
For the Danish government
– Explicit contains a narrative section called
“the knowledge narrative”
– The section tells the story of how IC helps to
create value for companies.
REPORTING OF IC
IC reporting
• The process of creating a story that shows
how a company uses its intellectual capital
to create value for its customers
• Involves
Identify, Measuring & Reporting of IC as well
as constructing a coherent presentation of
how the company uses its knowledge
resources
IC reporting
• IC statement which combines numbers,
narrative and visualization of the company
intellectual capital
• IC statement can fulfill two functions
1. Internal management function
2. External reporting function
1. Internal management function
• IC statements are a part of a company’s
knowledge management strategy
– IC can systemize KM [a coherent and
systematic approach to managing and sharing
knowledge which support general strategy]
• IC statement can develop specifically
management of knowledge resource for a
company
1. Internal management function
• IC statement helps develop the firm’s
strategy and focuses on its innovative
capabilities
– Develop customer relation
– Develop innovation
– Develop effective processes
– Develop new business model
1. Internal management function
• IC statement is a monitoring system that
helps firms to account for their intangible
resources and relate them to innovation
– Survey the composition of intangibles and
explain their development
– Survey the investments made in developing
intangible resources and highlight the firm’s
effort to make greater use of intangibles
– Monitor the effect of intangible resources and
throw light on the results gained from
intangible resources
1. Internal management function
• IC statement benefits the firm’s innovation
ambition by linking efforts and objective to
make the firm a more innovative one.
IC Statement
2. External reporting function
• IC statement can be used to communicate
to various stakeholder groups
– To the company itself [identity]
– To potential employees
– To customers
– To co-operative partners
– To investors
– To citizens
– To political system
IC Statement
IC report
Intellectual Capital Reporting
1. Improving internal management
2. Improving external communication
3. Statutory and transaction issues