About Intellectual Assets and

Their Treatment in Financial

Statements and National

Accounts

Intellectual capital is the basis of wealth and growth. Gross domestic product is dependent on our ability to provide value added. The better our ability to provide value added per working hour, the greater will our productivity be. Issues that foster our ability to ensure productivity include rights related to ownership and usage of intellectual property, human capital (e.g. skills), structural assets (coded information, information systems etc.), and relational assets (the ability to benefit from relations). At the moment, not all intellectual assets are recognized in balance sheets. Intangible assets that can be recognized in balance sheets, include, e.g., development costs, goodwill, advance payments, and intangible rights. Goodwill is often used in recognition of brand value (should be based on cleaned data), and refers usually either to difference between company equity and assets at the date of recognition (e.g. balance sheet date) or at company acquisition. In other words, goodwill can contain reflections of many issues, such as matters influencing stock prices in general (e.g. depression or boom, fluctuations etc.). Topics of conversation could include, e.g., the exact definition of brand value and its parts, the influence of personnel and management skills, company image, perspectives (the perspective buyers or stock owners and the existence unpublished data), as well as the constancy of brand value. Activities such as marketing and trainings are treated as costs in financial statements. However, for example, marketing activities are a significant factor of competitiveness. The activities of strategic marketing can bear fruits for a long time and influence the market share / sales / prices of sold articles for a lengthy period of time. In addition to product and process innovations, innovations can be related to, e.g., business models or marketing. Creation of innovations as well as efficient management of a company operations require skills. The differences in balance sheet contents between, e.g., companies operating in traditional investment intensive sectors and knowledge intensive business sectors is remarkable which also influences access to different types of financing. In my opinion, recognition of certain costs such as marketing or certain aspects of management in company balance sheets would possibly enhance predictability and exactness of company value. It might also impact the abilities to gain finance, mitigate risks, and accelerate GDP growth. National accounts include only fraction of intellectual assets that are in possession of individuals, which may influence the willingness to finance certain activities. Examples of the last mentioned might be learning and education, whereas, e.g., the possession of, e.g., real estate (tangible asset) is more visible in national accounts. It is, however, our knowledge and abilities that ensure the success. Another topic of discussion is human rights perspective when talking about valuation of certain intellectual assets that belong to individuals. Our knowledge and skills enable the development of new innovative solutions, allow us to pursue ever better standards of living, and make some matters in life cheaper and accessible to larger groups of people. From this perspective, inaccurate valuations can slow down positive development, cause sudden collapses in the economy, and distort supply / demand conditions. Johanna Sandman 1.4.2023

INTELLECTUAL ASSETS; Human Capital, Structural Assets, Relational assets

INTELLECTUAL PROPERTY RIGHTS; e.g. Copyright, Patents, Utility Models, Industrial Designs, Trademarks, Trade Secrets, Apellations of Origin

INTANGIBLE ASSETS; Development Costs, Goodwill, Advance Payments, and Intangible Rights (selected)