Companies face, on the one hand, the challenge of making intangible investments that enhance the capacity to generate wealth in the future, and, on the other, the need to efficiently identify and manage existing intangible assets in the within the organization. This is especially difficult, given that the information and accounting systems commonly used in commercial companies are oriented mainly towards the measurement of profits and the value of equity in monetary terms and, therefore, have a limited capacity to reflect the value and importance of intangible investments.
In recent times, the efforts of academics and accounting professionals have perfected accounting systems, achieving highly detailed charts of accounts. There is an important bibliography that deals with very specific aspects that affect property, plant and equipment, inventories or trade bills payable, for example: Intangible assets have received a little less attention - except for a few such as goodwill, research expenses and development or industrial property - despite the fact that, in many companies, the value of these intangible assets and others that are not accounted for is much higher than that of their tangible assets.
The first antecedent in Spain for the valuation of intangible assets in financial accounting is the so-called goodwill, the role of the Business Key.Goodwill is the difference between the book value of the company and the price paid for it in a business acquisition. Goodwill is briefly defined: “it is the set of intangible assets, such as the clientele, name or company name and others of a similar nature that imply value for the company. This account will only be opened in the event that the goodwill has been acquired for consideration. This concept is an approximation to the valuation of the intangibles of a company, but in itself it does not contribute anything, it is a static concept, since it only usually materializes in moments of mergers and acquisitions. Ideally, from a management or acquisition point of view, study how intangibles evolve over time, that is,analyze whether intangible assets increase or decrease both in their number and classification and in their monetary valuation between comparable periods of time. This would provide us with new strategic visions and a decrease in investment risks.
In recent years, both in the international accounting standards (IASC) -NIC 38, as in the regulations in general in almost all countries and in Argentina a more detailed treatment of these assets has been carried out. The ASB (1993) defines intangible assets as those non-financial assets that have no physical substance, but that are identifiable and controlled by the company through legal rights or physical custody. The standard understands that an intangible asset is identifiable, when it can be sold independently of the company. If not, it is considered inseparable from the goodwill of the company, becoming part of it.The term control refers to the ability to obtain economic benefits or to restrict the access of the competition to them due to the existence of legal rights. This can also be obtained through physical custody, that is, when technical or intellectual knowledge, arising from the development of certain activities, is kept secret. When some of these circumstances do not exist, the company does not have sufficient control over the benefits to recognize them as assets.
At the same time, we define acquired goodwill as the difference between the price committed to acquire a company and the sum of the fair values of identifiable assets and liabilities of the company. This fund may be positive or negative, depending on whether the amount committed exceeds the fair value of identifiable assets and liabilities or, on the contrary.
With regard to intangible assets, a distinction is made between:
- Acquired from third parties individually, which will be capitalized at the acquisition price. Acquired as part of a business, which will be recognized separately from goodwill, if its value can be measured reliably. If not, they will be included in the purchase price attributed to goodwill Internally generated intangible assets, which can be recognized only if they have a clearly assignable market value, that is, if the item belongs to a homogeneous group of assets, which are equivalent in all respects, and if there is a market capable of establishing a value for these assets.
IAS-IAS 38 defines an intangible asset as an identifiable, non-monetary and without physical substance, held for use in the production or sale of goods and services, to rent it to third parties or for administrative purposes. Furthermore, the aforementioned standard expressly includes two other aspects to be considered for an element to satisfy the definition of an intangible asset: control over them and the ability to obtain future economic benefits.
As for today in Argentina, the panorama is not very different with respect to what happens in other areas, given the process of harmonization with international accounting standards.
IAS 38, the recognition requirements for intangible assets are as follows:
- Probability that future economic benefits, corresponding to the asset, will reach the company The cost of the asset can be measured reliably.
Pe; In relation to the Spanish accounting regulations, in the PGC (General Plan of Accounts), intangible assets are defined as that "set of intangible assets constituted by rights susceptible of economic valuation." It can be said that this standard is referring to to identifiable elements to which a possible value is attributed. However, the identifiable term, properly speaking, does not appear in the PGC, although it does appear in the resolution of the I: C: A: C: (1992). This defines goodwill as the difference between the amount paid in the acquisition of a company and the sum of the identifiable values of the individual assets acquired minus the liabilities committed in the acquisition, although, as can be seen, not to incorporate it into the own goodwill concept.
Analyzing the previous rules, we can say:
- The intangible concept contemplates the following requirements:
- Lack of physical substance Be identifiable Contribution to future income.
- There is a difference in valuation criteria between assets acquired and internally generated, without there being a defined and homogeneous criterion in this regard.
The first conclusion reached is the inherent difficulty of valuing these types of assets, since they involve very important doses of subjectivity, a crucial aspect but not definitely addressed by the various regulations. Palpable proof of this is the continuous review to which such criteria are subjected by the regulations. This effect is undoubtedly associated with the performance of companies and, therefore, the economy in general.
The second conclusion is that certain intangibles such as customer lists, brands, customer relationships, human capital, structural capital, etc., do not meet the definition of assets and, consequently, should be recorded as an expense when they are produced; not appearing on the asset side of the Balance Sheet (IAS 38).
Finally, to the extent that the current accounting model does not allow the value of intangibles to be appropriately reflected in the Financial Statements, company managers must provide capital owners with additional information to that required by accounting standards to facilitate know the real equity situation of the firm and properly estimate its value.
Intangible liabilities from the accounting perspective: From the accounting point of view, when, in financial accounting, an attempt is made to value the net capital of a company, it is done as the difference between the assets and liabilities due or obligations.
That is to say:
Net capital (Non-callable liabilities) = Assets - Callable liabilities
And equality is always fulfilled
Active = Passive
If the intangible capital of an organization is made up of the sum of the intangible assets of a company and, if the equation C = A - P is valid within a historical cost accounting system, there must, by logical extension, be an equation equivalent with respect to intellectual capital.
Therefore: CI = AI - PI
Being: CI = Intangible Capital
AI = intangible assets
PI = Intangible liabilities
This equation has two implications:
- Every organization measures its own resources by first recognizing and valuing the assets
and then subtracting the obligations it has incurred. If equity is indirectly measured by subtracting liabilities from assets, then why should intangible capital be
different?
- If the equation
CI = AI - PI is fulfilled, then it is necessary to build a method that allows at least to identify the existence of intangible liabilities. Balancing the books of intangible capital in organizations means having to recognize the existence of intangible liabilities.
Thus, the balance sheet of a company should be as follows:
INTANGIBLE ASSETS INVISIBLE FINANCING
Visible Not visible FINANCING VISIBLE TANGIBLE ASSETS Fixed assets Merchandise Accounts Receivable Treasury Own capital visible Long-term debt Short-term debt
Modified balance sheet Human assets Structural assets Relational assets Intangible capital Intangible liabilities BALANCE SHEET.
As a starting point, the concept of intangible liability should be defined to avoid any type of ambiguity. According to accounting regulations, liabilities are defined as “the set of assets of a company, which represent the total of its debts and obligations.” This definition of liabilities refers to the “visible” part of the balance sheet and they are collected and measured by traditional accounting. In the “not visible” part of the balance sheet, by approximation, the intangible liability would appear.
Harvey & Lusch (1999) define the intangible liability as: “The responsibility or obligation of the company to transfer economic resources to provide service to other entities in the future. It can also reflect a lower profitability ”.
A first approximation of the existence of these intangible liabilities in accounting can be found in the appearance of negative goodwill, which arises in those acquisitions of companies when the purchase cost is less than the share of the acquirer in the values of the assets and identifiable liabilities.
Extensive is the writing that speaks to us of business excellence, capabilities, competitive advantages and the virtue of intangibles as a source of wealth creation. But, from a practical point of view, regardless of the economic cycle in which we are inserted, there are suspensions of payments, which in many cases do end up leading to bankruptcy.
Only in Spain, in the fourth quarter of 2002, there were 112 more payment defaults and 187 bankruptcies. The reasons, although diverse, we tend to attribute to factors external to the organization itself. Sectors that are going through difficult situations, falling consumption, down cycles, and a long etc., become real defensive barriers. But if the true reasons for success must be sought in well-defined and perfectly materialized strategies, where should we look for the inducers of failure?
Referring to business success, some argue that the reasons must be sought within the organization itself, regardless of external factors. By analogy, when referring to failure, we must also focus on the organization itself.
Today the discussion of intangible capital is directed, fundamentally, in its consideration of intangible resources and the direction of this class of resources by organizations. But there are intangible resources, they must also have their opposite in the organization, which are intangible obligations. As Harvey & Lusch indicate: "We must balance the intellectual capitals on the accounting books…".
We must bear in mind that the management of intellectual or intangible capital does not consist merely in identifying and adding the intangible resources of the organization. An organization's strategic focus must change by increasing and developing relevant intangible assets, as well as recognizing the impact of intangible liabilities.
Whether at an accounting or strategic level, the need to introduce a new concept in the study of intangible capital is appreciated: intangible liabilities.
It is necessary to develop a new intangible capital model, where based, on the one hand, on what is known in classical accounting -financial and analytical- and on the other, on the most advanced developments on intangible assets, intangible liabilities are considered from the optics of its identification, measurement and management. Emphasizing their participation in the destruction of competitive advantages.
Now, both the approach and the empirical research point to the existence and measurement of visible and invisible intellectual capitals, so the objective of measuring them is met. In addition, there appears a high statistical and positive correlation between these two variables, which allows to accept the hypothesis, that is, that invisible intellectual capital has a statistical and positive influence on visible intellectual capital, in the component called structural capital analyzed.
In light of this research, the results suggest that the invisible intellectual capitals would be the makers of the visible intellectual capitals.
The results are relevant if one starts from the fact that until now the instruments for measuring intellectual capital considered variables such as investments in research and development, patents, copyrights with those called attitudes of workers, experience, staff turnover in the same category, organization of knowledge, among others, so the division opens the way to develop the management of invisible intellectual capitals from another perspective, with the information that they will positively and directly influence the visible intellectual capitals in the object of study of this investigation.
It would be important that later lines of research verify the fulfillment of this correlation between the visible and invisible intellectual capitals in the human and relational intellectual capital components.
This proposal of the intellectual capital shows the empirical existence of the visible and invisible intellectual capitals and opens the way to carry out measurements of the visible and invisible intellectual capital, in companies, manufacturing companies, with the limitation that is made through the theory of resources and capacities, which considers each company different, and therefore the measurement would have to be carried out based on the objectives and needs of each company, that is, in a differentiated way.
Finally, a possible line of research in manufacturing companies could be relevant if it is related to concepts such as competitiveness, which is a strategic line.
