Inderscience Publishers

Accounting for knowledge assets: do we need a new financial statement?

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Courtesy of Inderscience Publishers

Knowledge-based companies have suffered from the failure of the traditional financial reporting system to reflect knowledge assets on the balance sheet. Because of the level of uncertainty associated with knowledge-related expenditures, accountants normally must classify them as expenses. This system was not unreasonable in the past, when assets were primarily tangible and it was normally clear what role these assets would play in providing benefits to the organisation. In recent times, however, knowledge assets and other "soft" assets have been increasingly important to success. We need a mechanism that will reduce the need to make these capitalisation/expense decisions prematurely. I discuss the benefits of creating a new financial statement containing expenditures for which status as an asset or expense has not yet been resolved.

Keywords: intangibles, knowledge assets, intellectual capital, knowledge resources, accounting under uncertainty, intellectual assets, research and development

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