Accounting’s 21st Century Challenge: How to Value Intangible Assets

22. March 2016

Date: 22-03-2016
Source: The Wall Street Journal

Issue takes on growing significance as companies rely more on holdings like brands, data and algorithms

When RadioShack Corp. filed for bankruptcy protection last year, it raised more than $170 million by selling such holdings as real estate, leases and inventories of smartphones, computer cables and cameras.

But the retailer’s books didn’t acknowledge two of its most valuable assets: its brand and its customer data.

How do you attach a price tag to something you can’t see or touch?

The question is increasingly significant for investors as more companies collect information about their customers and use it to develop products and services. Some companies rely on the hipness of their brands to propel sales.

Assigning a value to a physical asset like a store or equipment is relatively easy. But, in the murky world of intangible assets, the calculations are squishy. The problem of how to value such assets has vexed accountants for decades. Read the rest of this entry »