The Exclusion of Some Intangible Assets on the Balance Sheet

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: The Exclusion of Some Intangible Assets on the Balance Sheet

Introduction

This seeks to discuss the view that the exclusion of some intangible assets from the Balance Sheet ( is inconsistent and gives an incomplete picture , which cannot be justified by the requirements for accounts to be objective and prudent . This view is premised from a management perspective . The discussion starts with understanding the work of a manager , the possible basis of his argument or view on exclusion of some intangible assets . Given his basis , an examination is also made

as the present theory and practice on Intangibles particularly on the nature and limitations of financial accounting and the distinction of financial accounting and management accounting . This will therefore conclude on either sustaining or explaining the view of the manager on mentioned exclusion

The work of a manager

A manager needs to have a complete picture of what is happening in the organization . He needs a lot of information for decision-making . A manager is more forward looking than a financial accountant . He plans makes forecasts , implements a financial plan or a budget to attain corporate objectives . He is therefore interested in how his performance and are measured in terms of the use of company resources . Parts of the company resources that he is managing are the intangibles . It is therefore logical to expect that a manager wants to be credited with whatever accomplishments he has attained so far in organization in terms of improved or increase assets of the assets . Said increased assets are also expected to increase stock prices of the corporation and therefore there is basis to conclude having more assets is favorable to the business . Let us illustrate . If he leads a group who conducts a survey or who develops a computer program or spend research and development cost , he expects to eventually generate a product that would produce a future economic benefit . It would therefore be in his interest that the cost he used in developing the program and the cost he spends in the research and development should be part of the asset , particularly intangibles . But current standard on financial accounting imposes requirements before some intangibles will have to be part of the assets in the balance sheet . He therefore argues that there should be no exclusion of some intangibles since doing so would be inconsistent and gives an incomplete picture of the organization . He believes that such exclusion cannot be justified by the requirements for accounts to be objective and prudent . As to how true be his view is the subject of the following discussion

Basis of Manager 's View

Aside from his position to be recognized for his accomplishment , a typical manager argues as

how Reporting And Measuring Of Intangible Assets , 2005 , said which reads

In today 's business environment , intangible assets - such as knowledge skills

relationships , processes , brands , or culture - are , more than ever , a vital strategic

resource . A recent Economist Intelligence Unit survey reveals that even though...