Accounting for intellectual property?

Ghafele, Roya (2010): Accounting for intellectual property? Published in: Journal of Intellectual Property Law and Practice No. 5 (10 May 2010): pp. 521-530.

Abstract

Accounting constitutes a very specific form of language, which is highly standardized, mathematical in nature and seeks to uniformly and systematically describe events while avoiding expressions of individual creativity or explicit political positions. In this sense, accounting is a social, cultural and historical artefact rather than a natural or technical phenomenon and can therefore be viewed as the decisive instrument to create and maintain imagined business communities. On the balance sheet, IP experiences a specific form of authorization. It is represented in the discourse of accounting by ‘intangibles’, an imprecise term associated with the increasingly observed ‘gap between the market and book value’, while current accounting systems are determined by a tangible assets’ based perspective and offer little scope to document how IP relates to business performance. Accounting may thus be seen as a gate keeper of the status quo that poses significant challenges for IP-rich companies, confronted with the challenge to either communicate around the lingua franca of accounting or accept that under current accounting statements they cannot adequately document how IP relates to their business performance.

• Item Type: MPRA Paper
• Language: English
• Keywords: intellectual property, financial reporting, intangible assets mapping, accounting
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O34 - Intellectual Property and Intellectual Capital

References

Alvesson, M. & Kärreman, D. (2000). Taking the linguistic turn in organizational research: challenges, responses, consequences. Journal of Applied Behavioural Science. 36 (2), 134-156.

Sullivan P. (Jr.) & Sullivan P. (Sr.) (2000). Valuing intangibles companies – An intellectual capital approach. Journal of Intellectual Capital Management. 1(4), 328- 340

United Nations Department of Economic and Social Affairs Conference. (2006) July 12-13. Conference on the Measurement of Intangibles in Systems of National Accounts. United Nations Headquarter. New York

Moerman, L. & Van der Laan, S. (2006). TRIPS and the pharmaceutical industry: Prescription for Profit? Critical Perspectives on Accounting. 17, 1089 – 1106

World Intellectual Property Organization (2007). What is Intellectual Property? www.wipo.int

Hanl, P. (2006). Intellectual Property Rights Business

Management Practices: A survey of the Literature, Technovation. 26, 895- 931

Ghafele, R. (2005). Getting a Grip on Accounting and Intellectual Property. WIPO SME e Newsletter. http://www.wipo.int/sme

Spender, J. (1996). Making Knowledge the Basis of a Dynamic Theory of the Firm. Strategic Management Journal. 17, 109-122

Audretsch, D.B. & Lehmann, E. (1994). Financing high-tech Growth: The role of debt and equity. Indiana University Working Paper 1904;

Mavrinac, S.C. & Boyles, T. (1996). Sell-Side Analysis. Non Financial Performance Evaluation and the Accuracy of Short-Term Earnings Forecasts. Ernst & Young LLP Working Papers.

Barney, J.B. (1997). Firm resources and sustained competitive advantage. Journal of Management Science. 17, 9-120

Davidson. S. (1999) 10th ed. Accounting: The Language of Business. Thomas Horton & Daughters.

Parker, I. (1992). Discourse Dynamics. London: Routledge

Phillips, N. & Hardy, C. (2002). Discourse Analysis- Investigating processes of social construction. Thousand Oaks California: Sage

Mumby, D. & Stohl, C. (1996). Disciplining organizational communication studies. Management Communication Quarterly. 10(1), 50-73

Jaeger. Anleitung zur Analyse politischer Texte. DISS: Duisburg

Berger, P. L. & Luckmann, T. (1967). The social Construction of Reality. A Treatise in the Sociology of Knowledge, London: Penguin

Bourdieu, P. (1992). Language and Symbolic Power. Blackwell Publisher: London

Barthes, R. (1953). Le Dégré Zéro de l‘ Ecriture. Edition du Seuil: Paris

Barthes, R. (1964). Mythen des Alltags. Suhrkamp: Frankfurt am Main

Rodov, I. & Leliaert, P (2002). FiMIAM: Financial method of intangible assets measurement. Journal of Intellectual Capital Management. 3 (3), 323- 336

Example provided by the CEO of Mediafinance at the ACCA, the Association of Chartered Certified Accountants, Roundtable discussion on the Creative and Innovative Economy. Held in London on March 12 2009 at the Premises of ACCA.

Gu, F. & Lev, B. (2000). Markets in intangibles: Patent licensing. Boston University School of Management Working Paper.

Lev, B. (2000). Communicating Knowledge Capabilities. Discussion Paper of the Stern School of Business: New York Informal conversation with ACCA (the Association of Chartered Certified Accountants) officials, 2.6.2009, London at the premises of ACCA. Article 197 paragraph 2 of the Austrian Commercial Code

Johnson, L. & K. Petrone (1998). Is Goodwill an Asset? Accounting Horizons. 12 (3), 292-303

Schuetze, W. (1993) What is an asset? Accounting Horizons 8 (1), 69-75

Laux, C. & Leuz, C. (2009). The Crisis of fair-value accounting: Making sense of the recent debate. Accounting, Organizations & Society 34 (6-7), 826-834 Email from Accounting Professor Christopher Chapman, 10.11.2009

International Accounting Standards 38, London 1998, http://www.iasplus.com/standard/ias38.htm

FASB (Financial Accounting Standards Board): Summary of Statement Nr.142 ‘Goodwill and other Intangible Assets’, http://www.fasb.org/st/summary/stsum142.shtml

International Accounting Standards 38, London 1998, http://www.iasplus.com/standard/ias38.htm

Sullivan, P. H (2000). Value Driven Intellectual Capital. How to Convert Intangible Corporate Assets into Market Value. John Wiley: New York

Guthrie, J. (2001). The Management, measurement and the reporting of intellectual capital. Journal of Intellectual Capital. 4 (4), 429- 440;

Lev, B. & Sougiannis, T. (1999). Penetrating the book-to-market black box: The R&D effect. Journal of Business, Finance and Accounting. 26, 419- 449;

Reilly, R. & Schweihs, R.(1998). Valuing Intangible Assets.

McGraw-Hill Professional: New Jersey; Razgaitis, R. (2002). Technology valuation. In: Goldscheider, R. (ed.): Licensing Best Practices. John Wiley: New York, 165-180

Lev, B. & Zarowin, P. (1999) The Boundaries of Financial Reporting and How to Extend Them. Journal of Accounting Research. 37 (3), 220-240

SEC (Securities and Exchange Commission): Strengthening Financial Markets: Do Investors Have The Information They Need? A Report by the SEC Special Task Force. 2001 http://www.mba.yale.edu/news_events/sec_exec_sum.htm

Laux, C. & Leuz, C. (2009). The Crisis of fair-value accounting: Making sense of the recent debate. Accounting, Organizations & Society 34 (6-7), 826-834

Rescher, N. (1969). Introduction to Value Theory. Prentice-Hall: New Jersey

Crosby, A. (1997). The Measure of Reality: Quantification and Western Society 1250- 1600. Cambridge University Press: Cambridge

Basel Committee on Banking Supervision, (2000). Report to G7 Finance Ministers and Central Bank Governors on International Accounting Standards. Basel http://www.iasplus.com/resource/basel1.pdf, quoted from

Ghafele, R. (2005). Getting a Grip on Accounting and Intellectual Property. WIPO SME e Newsletter. http://www.wipo.int/sme

Caninbano, L, Garca-Ayuso, M. & Sanchez, P. (2000). Accounting for Intangibles: A Literature Review. Journal of Accounting Literature. 19, 23-40; Lev, B., Sarath, B. &

Sougiannis, T.: R&D Reporting Biases and Their Consequences. New York University 1999, http://pages.stern.nyu.edu/~blev/research.html;

Brown, S, Lo K. & Lys, T. (1999). Use of R2 in Accounting and Research: Measuring Changes in Value Relevance over the Last Four Decades. Journal of Accounting Economics. 28 (2), 18-36

Stewart, T. (2001). The Wealth of Knowledge: Intellectual Capital and the 21st Century. Organization Currency: New York

Andriessen, D. (2000). Weightless wealth: four modifications to standard IC theory. Journal of Intellectual Capital. 2 (3), 204- 214; Van der Meer-

Kooistra, J.& Zijlstra, S.M. (2001): Reporting on intellectual capital. Accounting, Auditing & Accountability Journal. 14 (4), 456- 476

Elton, J., Shah, B. & Voyzey, J (2002). Intellectual Property: Partnering for Profit. McKinsey Quarterly. 4, http://www.mckinseyquarterly.com/article_page.asp?ar=1248&L2=21&L3=35&srid=9&gp=1

Rivette, K. G.& Kline, D. (2000). Rembrandts in the Attic. Unlocking the Hidden Value of Patents. Harvard Business School Press: Cambridge MA

Lev, B. (2000). Communicating Knowledge Capabilities. Discussion Paper of the Stern School of Business: New York

Ghafele, R. (2005). Getting a Grip on Accounting and Intellectual Property. WIPO SME e Newsletter. http://www.wipo.int/sme

Abody, D. & Lev, B. (2000). The value relevance of intangibles: The case of software capitalization. Journal of Accounting Research. 14, 245- 260

Andriessen, D. (2000). Weightless wealth: four modifications to standard IC theory. Journal of Intellectual Capital. 2 (3), 204- 214;

Van der Meer-Kooistra, J.& Zijlstra, S.M. (2001): Reporting on intellectual capital. Accounting, Auditing & Accountability Journal. 14 (4), 456- 476

Hines, R.D. (1988). Financial Accounting: In Communicating Reality, we construct reality. Accounting, Organizations & Society 13, 251-261; Macintosh, N. (2009). Accounting and the truth of earnings reports : philosophical considerations. European Accounting Review 18 (1), 141-175;

Macintosh N., Shearer T., Thornton D., Welker M. (2000). Accounting as simulacrum and hyperreality: perspectives on income and capital. Accounting, Organizations and Society 25 (1), 13-50

FASB (Financial Accounting Standards Board) (2001). Improving Business Reporting: Insight into Enhancing Voluntary Disclosures, Steering Committee Report. Business Reporting Research Project. http://www.fasb.org/brrp/brrp2.shtml

FASB (Financial Accounting Standards Board) (2001). Business and Financial Reporting, Challenges from the New Economy. Special Report. Financial Accounting Series. http://www.fasb.org/articles&reports/new_economy.shtml

Kote,l & Drehwing, E. (2005). The Interplay between IP and Sarbanes-Oxley – Outline & Background Material. From PLI’s Course Handbook. Handling IP Issues in Business Transactions 2005 # 6056, http://www.darbylaw.com/Files/tbl_s31Publications/FileUpload137/1864/pli.pdf

Gallagher & Dawsey Co. Wading Through The Intellectual Property Requirements Of The Sarbanes-Oxley Act Of 2002. http://www.invention-protection.com/ip/publications/docs/Wading_Through_The_Intellectual_Property_Requirements_Of_The_Sarbanes_Oxley_Act_Of_2002.htm

Denton, F. & Heald, P. (2003). Random Walks, Non-Cooperation Games, and the Complex Mathematics of Patent Pricing, Rutgers Law Review. 55, 1175 - 1190

Kannan, G. & Aulbur, W.: Intellectual capital- measurement effectiveness. Journal of Intellectual Capital Management. 5 (3), 389- 413