Have you ever heard of the term 'runaway' success? And have you heard how initial public offerings get runaway success even when they have no earning history? It all happens when the market fails to understand the tremendous significance of intangible assets which ultimately delivers a major contribution in the financial performance.
Information asymmetry takes place when the market doesn't responds in a progressive way to a certain financial aspects. For instance, in traditional financial reports, information asymmetry may occur through press releases, financial reporting, analytical reports, etc. So no matter how belittle we think it could be, but intangible asset has its own importance. The true power of intangible assets lies in research and development, copyrights, patents and brand equity. And since we underestimate its worth, we face a massive chunk of information gap in between.
The importance of intangible asset:
If you will ask a recommended asset protection service in Georgia for how important intangible asset is, you will get an answer that it hold equal relevance to that of an intangible asset. This form of asset works as an 'intellectual capital' which further comprises the key elements of shareholder value in the world of knowledge based economy. However, the general accounting principles do not count this form of asset under the statements. Thus, guesswork and incomplete information drives the route to misconception in managing assets for the investors.
Let's understand the situation with an example!
A pharmaceutical company is about to launch a new product… a new drug. The company will hence make a decision on every aspect of it- be it the cost, the marketing, the branding, the reach, the target audience and so on. But nowhere in the planning, it will include the value of research and development. It won't become a part of its financial statement. Unless and until the sales are made, no R&D cost becomes a part of financial statement and thus, it slips from becoming a part of the financial statement.
The disconnection:
The ignorance which we heap towards this intellectual capital results in creating a serious disconnect between capital markets and accounting systems. Traditionally, accounting system is all about the historic cost of the equipment and inventory and market value is based on the results which come through cash flow.
Quick tips to value your intangible asset:
- Start with the calculation of total value of your company asset, especially the intangible one.
- Try filling the gap that arrives due to market-to-book approach of calculating and managing assets.
- Calculate the pretax earnings of the past three years and make a well defined balance sheet for the same.
- You can also check the industry's average ROA or calculate the excess ROA by multiplying the industry average with company's tangible asset.
- Calculate the final net present value of your asset and never fail to pay the right amount to the taxman.
Discuss your queries with the best asset protection services in Georgia to get the best answers.
Liberty Street Advisory Group Offers asset protection services in georgia refers to the separate entities, Liberty Street Law, Liberty Street Capital and Trust & Estate Stewards. None of these entities or persons furnish actuarial, accounting or comprehensive tax advice. Liberty Street Capital, is a limited liability company registered as an investment advisor in Georgia and other locations. Trust & Estate Stewards is a limited liability company. Past results are not a guarantee of future performance.
