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The main difficulty is that the value of intangible assets depends on their organizational context and a company's strategy.
But despite the burgeoning value of intangible assets, most financial institutions don't know how to value them, according to David Martin, an intellectual property expert.
"We need an accounting model that appropriately recognizes the value of intangible assets, which make up more and more of the value of today's corporations," Mr. Butler said.
The most recent quarter included a one-time charge of $2.3 billion to write down the book value of intangible assets.
The value of intangible assets is highly dependent on a company's own ability to fund those assets, while the value of tangible assets is independent of the company.
Air Canada did not release net after-tax earnings figures because it is reviewing the value of intangible assets on its books, like good will, and will probably make "significant downward adjustments," the company said.
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But now 80%of a company's value is comprised of intangible assets such as brand value, intellectual property and, of course, people.
This chapter is about the persistent challenge to improve the financial and competitive-advantage health of their companies, which must start by fashioning relevant means to measure the contributory value and performance of intangible assets.
Duncan and Elliot offer several examples of the ways in which companies are placing value on intangible assets like migratory birds habitats or clean water for spawning fish.
Excluding a 9-cent charge for the gradual write-down of intangible assets — the value of contracts Medco received when it was spun off from Merck and Company in 2003 — earnings per share would have been 86 cents.
Yahoo, for instance, is shifting a European hub to Ireland, which offers, among other attractions, a corporate tax rate of just 12.5% and juicy tax-arbitrage opportunities for firms with lots of intangible assets whose value can be shuffled between jurisdictions.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com