Measure the Unmeasurable？ Intangible Assets as the Major Strategic Keys of Enterprises, Their Contribution, Difficulties and Proposals for Reliable Financial Statements

It is a common belief, for the last two decades, that we can observe the transformation of the intemational economy, from industrial to knowledge economy. In a continuous changing economy, the main advantage the companies have is not the buildings, the machines, the trucks, or the total equipment. The strategic key of a company today is the capital that cannot be copied easily, that is not disclosed and is not tangible, the intellectual capital of the company. The intangible assets can be characterized as those without physical appearance and the value of which is limited by the rights and anticipative benefits that possession confers upon the owner. The expansion of companies into foreign markets presupposes the aggregation of financial information that includes non-homogeneous elements. The purpose of this paper is to examine the framework of identification, as well as the disclosure requirements of brand names as they have been set by several articles of Commercial Law and recognized by professional accounting institutions. Emphasis will be given to analyzing existing accounting recognition and measurement, and proposals worldwide. In conclusion, this study indicates the accounting problems of definition, measurement, and disclosure of the majority of these intangible assets to users of financial statements of the company. Despite all the difficulties, this property of the company must in some way be measured and disclosed to lead to more reliable financial statements. The proposals of this paper, will help the accounting community to solve this major problem.

Pricing and Valuation of Intangible Assets

Intangible assets are parts of the companies＇ balance sheet, but given their intangible nature, they cannot be qualified as financial assets as other incomes can be. Therefore, the valuation, even if reflected in accounting reports, is far from objective, and each company considers it in accordance with their sectors or auditors. Auditors, consultants, and business schools are developing alternative tools for measuring these assets, but there is not a consensus formula that quantifies the business value of intangibles. In recent years, communication analysts and consultants have developed brand valuation and reputation methodologies, which are starting to have a relative weight in business management. The proposed research work is a review of the current methodologies of reputation valuation as a starting point for creating a reference model formula for the valuation of intangibles that provide professionals and experts in the field with a worldwide recognized tool.

The Effects of Intangible Assets （IA） on the Loan Interest Rates for Small- and Medium-Sized Enterprises （SMEs） in Taiwan

This study is motivated by the lack of direct empirical research on the relationship between intangible assets （IA） and loan interest rates for small- and medium-sized enterprises （SMEs） in emerging markets. This study uses a multivariate regression to investigate the effects of 1A on loan interest rates by focusing on SMEs. Using a panel sample of 186 publicly-listed SMEs with 952 annual observations in Taiwan from 2001 to 2006, the empirical findings indicate that an SME＇s IA does negatively affect loan interest rates. The main contribution of this study lies in its direct testing of whether IA can affect the loan interest rates for SMEs in an emerging market. The finding provides empirical evidence that an SME with greater IA leads to lower interest rates on bank loans, implying that SMEs should strive to invest in IA and enhance their knowledge management for obtaining more benefits of loan interest rates. Furthermore, the findings may provide empirical evidence for SMEs in emerging markets and can be compared with those for firms in industrialized economies.

How to improve IFRS for intangible assets?A milestone approach

This study focuses on the decreasing relevance of financial information associated with current financial reporting standards for intangible assets.We summarize and compare three approaches to improving financial reporting standards for internally generated intangibles—the recognition approach,the fair value approach and the disclosure approach,among which we focus on the recognition approach.We investigate the impact of current International Accounting Standard 38 on the R&D capitalization policies of the high-tech industry,particularly among medical device firms in China.We conclude that the current recognition criteria are so stringent that they disincentivize firms from capitalizing their R&D investments.A large variation exists in capitalization timing within the medical device industry.Accordingly,we propose the milestone approach to revising financial reporting standards for intangible assets.We suggest that determining the capitalization criteria for intangibles based on the R&D cycle and capitalization timing should be moved forward.

Tax distortions in cross-border flows of intangible assets

The phenomenon of global fragmented production and associated trade in intermediate products,including intangible assets,has changed how economists study globalization and how new public policies are shaped.Understanding cross-border flows of disembodied knowledge,often associated with intellectual property(IP),is essential for analyzing how modern economies operate.Available data to document these international IP-related knowledge flowsdnamely cross-border payments for IPdare distorted by various factors.Tax planning by multinational enterprises has seriously distorted the measurement of cross-border IP flows,affecting national measurements of imports,exports,GDP,and productivity.The tax-induced mismeasurement could be more than 35% of global charges for use of intellectual property,and greater for individual countries,particularly high-taxrate countries.International initiatives to address the effects of tax base erosion,profit shifting,and other statistical initiatives on global value chains will improve future measurements of cross-border IP flows,improving the understanding of both the creation and uses of IP.

The role of intangible capital in wage inequality between skilled and unskilled workers in China

Wage inequality between skilled and unskilled workers has increased rapidly in China, right along with its major trading partner--the United States. Trade liberalization and technological improvement have been proposed as causes for the inequality, yet trade liberalization and technological improvement have set the stage for another, possibly more important, cause of the inequality： the movement of intangible capital to China. Intangible capital works synergistically with other inputs to make skilled-workers and tangible capital more valuable. Once the accumulated tangible capital reaches a certain level, its lower unit cost will attract the inflow of intangible capital, which will further expand the demand for skilled workers. As a result, wage inequality becomes larger in China. This paper takes the first step in an attempt to understand the role that the movement of intangible capital plays in the increasing wage inequality in China, and sets out several possible policy prescriptions for China to deal with this inequality.

Under the Skin. Intangible Components as the Basic Realities of Contemporary Post-bureaucratic Organizations： A Sociological Perspective

This article attempts to analyze, through a re-reading of the present sociological literature on the organization （that explores the organizations themselves in terms of ＂tacit＂ rather than ＂explicit＂, ＂socio-cultural systems＂ rather than ＂socio-technical systems＂）, the main intangible components that may affect the organizational live and all the organizing in general for the good or the evil, with respect to the ＂success＂ rather than the ＂failure＂ of the ＂in and out＂ organizational acting. There are then some sorts of ＂basic assumptions＂, deemed indispensable, also because they are still there and live in organizations but they do not always have a careful importance. Therefore the objective of the article is to describe them highlighting their salience and attempt to define parameters for further in-depth studies.

Accounting Aspects on Biotechnology and Their Products： According to Theory and Practice in Bulgaria

Biotechnology and the rights on biotechnological products are present-day topics, but at the same time, topics with deep historical roots. Biotechnological achievements are not a novelty to Bulgaria. They have existed for thousands of years and are connected with the production of milk and milk products, rose oil, herbal raw materials, and etc.. Contemporary biotechnological achievements are marketed in the form of nutritional, medicinal, and chemical products or as environmental protection. Traditional knowledge and achievements of modern science put the legal protection of biotechnology and its products on the agenda. In the national context, such rights have been statutory regulated and studied by specialists in the field of intellectual property. The problematic issues have not been so adequately treated in the country in terms of accounting theory and practice. The rights on biotechnology and biotechnological products are not within the scope of accounting items and accounting assets respectively. This is the motivation for the author to study the rights on biotechnology products within the context of their recognition as intangible assets. The author tries to present the conceptual framework for their identification and recognition as accounting items, as well as to define some scientific application problems on the topic.

Empirical Examination of Market Reaction to Transfer Pricing Taxation Announcement in Press： A Japanese Perspective

The Japanese Taxation Agency （JTA） introduced transfer pricing taxation （TPT） in order to suppress the outflow of profits and therefore taxes of Japanese companies, which are expanding overseas. There have been many press reports regarding the application of TPT, and so there is much public attention on this issue. TPT is applied to unnatural transfer prices （TP）. If TPT is applied to a multinational company （MNC）, the company will need to bear enormous documentation costs in its calculation of the ratable price. In addition, in the last few years, the target of TPT is shifting to the overseas transfer of intangible assets, such as trademarks, royalties, patents, and charges income. As a result, companies have become more careful about TPT and investors tend to pay attention to companies＇ TPT strategy. With regard to this point, this paper examines how the market evaluates news regarding TP by investigating the market reaction to an initial press report mentioning that a firm was involved in a TP manipulation and may be guilty of tax underpayment. We examine these events both because press reports are currently under intense scrutiny and because there has been very little research on firms that engage in tax sheltering （see, e.g., Graham ＆ Tucker, 2006; Hanlon ＆ Slemrod, 2009）. Some view the fact that not all firms engage in tax sheltering as surprising because of the widespread view that shelters, at least in the 1990s, in expectation, offered a positive net present value position. The potential negative public relations effect is often cited as one reason for this ＂under-sheltering＂ phenomenon （Bankman, 2004）. On the event study analysis, we find that the Japanese capital market has shown a statistically significant negative reaction to the press reports. This result is due to a strong distrust of corporate activity regarding TP strategies. Moreover, in order to clarify the reason why the market responds to reports of TPT being applied, we compute the cumulative abnormal returns （CARs） around the date of the press report and conduct two-stage least-squares estimation to examine where this result regarding the market reaction comes from. Our results indicate that the variables for intangible assets and effective tax rate and the variables which represent the extent of corporate governance （CG） are statistically significant with respect to these reactions.

Relational Capital and Open Innovation： Two Cases of Successful Italian Companies

Praxis and doctrine agree on the importance of innovation for the competitiveness and profitability of the firm. Innovation is considered as a leverage to start a virtuous circle that improves company performance and, consequently, reduce financial constraints for its development. Being creative is definitely the first mechanism that leads to innovation. Creativity spreads from both the individuals that work in the firm and from the social processes and contextual factors that characterize individual relationships within the company. Relational capital is the second mechanism that brings innovation. Relationships with clients, suppliers, competitors, producers of complementary products, public and private research institutions provide creative elements that, once screened, give rise to innovation. The first mechanism requires the firm to be creative on its own as innovations come directly from within the organization （＂closed innovation＂ model）. In the second, the firm must get in touch with potentially innovative idea~ coming from outside （＂open innovation＂ model）. Doctrine and praxis point out that firms, which do not stop at the first mechanism of innovation, turn out to be more innovative. The paper is structured as follows. In the first part, a theoretical framework is provided, describing the main findings, in the literature, in terms of relationships among innovation, creativity and relational capital. The second part is based on the analysis of two case studies. The first case （Coswell）, the very different degree of success （in terms of generated income） of its products seems to be tightly related on how much ＂relational capital＂ is ＂inside＂ the innovation. In the second case （Pastificio Rana） shows that innovation resulting from relational capital allows the company to excel against its far bigger and financially superior competitors.

Concerning the Capitalization Restriction of Training Cost According to IAS 38

In today＇s knowledge-based economy, the role played by human capital in the determination of the market value of a firm is recognized. To be able to persist in the open competition, entities are forced to invest increasingly in the professional training of their employees. Inconsistent with this rising importance is the prohibition to capitalize professional training cost according to international accounting standards （IAS） 38.69 （b）. Highly qualified employees ensure competitive advantages and thus lead to an increase in shareholder value. Regarding the financial statement as a primary source of information, it does not seem reasonable to leave such a valuable resource completely unnoticed in the balance sheet. Consequently, a truthful representation of a firm＇s asset should take training costs into account. This article pleads for a limitation of this general legal prohibition and analyzes under which premises those expenditures for training can comply with the common criteria of capitalization according to IAS 38.

Conceptual Determinants of Development of Intellectual Capital of Construction Enterprises

The presence and effective implementation of the intellectual potential of construction enterprises is important for creating unique competitive advantages as a response to challenges caused by globalization, the era of the knowledge economy, as well as the development of communication and information technologies. The purpose of the study is to provide a comprehensive understanding of the factors that contribute to the development of intellectual capital in construction enterprises;development of an algorithm for thorough response by the enterprise to the action of determinants.The following methods were used: Analysis and synthesis, induction and deduction when studying the variety of determinants of the development of intellectual capital;grouping in the process of classifying determinants;statistical methods in the process of researching the reporting of construction enterprises;systematic approach in the process of forming an algorithm of actions aimed at ensuring effective management of the intellectual capital of construction enterprises;abstraction to generalize research results and outline significant trends in changing indicators that reflect the development of individual components of intellectual capital. In the paper, the determinants of the development of intellectual capital are grouped according to the classification features important for Ukrainian construction enterprises.The indicators, the monitoring of which is necessary in the process of implementing a conscious response to the action of the determinants of the development of the intellectual capital of construction enterprises, are studied on the example of Ukrainian construction enterprises.