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Managing intellectual asset inventories
This is the time of year when many businesses start thinking about taking inventory. For hard goods manufacturers and distributors, this involves verifying the physical existence of raw materials, work-in-process, and finished goods on hand and comparing these tallies with the book value of the items. Book value is generally the sum of the costs associated with acquiring and/or creating the item. An inventory of physical goods is a corporate asset, used to generate profits, obtain loans, and attract investment.
Three factors are driving the trend:
as work-in-process inventory
1. Software development. A software development team at First Union Corporation acts like an independent vendor that "sells" software modules ("objects") to the companys business units.
For example, a software object lets salespeople in First Unions Insurance division access and update customer records on the companys large, centralized computer system through a desktop computer running Windows 95 or Windows NT. The object, or component, originally developed at the companys retail banking call center, will also be used in the commercial banking division. A software standard called Common Object Request Broker Architecture (CORBA) allows components developed on one system to run on another, incompatible system.
2. Employee training. Corporate training departments are using objects to reduce the costs of developing and maintaining new courses. For example, a course module (object) on how to use Internet search engines might be part of a course on how to do market research, competitive intelligence, or technology scouting. Several companies, including Oracle, Apple, Sun Microsystems, and International Thomson Publishing, are working on standards for learning objects (see Oracles Reusable Content Objects and the Instructional Management System).
3. Publishing. Webmasters make extensive use of objects to develop and enhance hypertext documents. Examples include:
Changes in accounting
The International Accounting Standards Committee (IASC), after ten years of work, issued a new standard for intangible assets this fall. It applies to expenditures on advertising, training, start-up, and R&D activities and goes into effect on July 1, 1999. It states that intangible assets can be recognized in financial statements only under the following circumstances:
How to measure
1. Historical cost less any amortization and impairment losses.
2. Fair market value less any amortization and impairment losses. This requires an "active market," and the authors of the standard believe that such markets will be rare.
IAS 38 requires companies to amortize the value of an intangible asset over a "useful life" and recognizes that in rare cases (e.g. a software object) the useful life could be longer than 20 years.
What it means
asset inventory in practice
2. Keep it flexible. During the first six months, the database format changed continually as we incorporated feedback from users. Its more stable now, but it will probably never be "finished." For one thing, the software tools we use are constantly being upgraded. For another, our level of sophistication is increasing. For example, we discovered that we could export our file of index terms as a "concordance" to automate index production in our print formats. This innovation dictated a minor change in the index file structure. Our choice of software was crucial; it allows us to make changes without the need of a programmer.
3. Include people assets. After several months of use, it became obvious that people assets should be included in the inventory. Documents are only artifacts of knowledge, relationships, and processes. In many cases, it takes a person his experiences, contacts, and skills to convert an intellectual asset into "work-in-process" or "finished goods." So we added author profiles, a "suggested by" field, and the ability to list assets by author or contributor.
4. Provide for multiple inventory levels. Everyone uses the same database structure and subject descriptors, and "core collection" of resources, but each team maintains its own specialized collection and can add new subject headings at to its own inventory. When the team is ready to publish a new item, a knowledge base editor evaluates it for new sources and subjects, adding those of general interest.
5. Rethink business models. After working with the system for almost a year, we find ourselves rethinking our business relationships. What should we expect from suppliers, contractors, and prospective employees in terms of contributing to our intellectual asset inventory? Should we provide clients and subscribers with access to our intellectual "raw materials" and "work-in-process?" If so, how?
6. Include cost estimates. By including the cost to acquire or create an item in the database, it becomes possible to establish a value for the inventory and its components. Even if the item doesnt meet the IAS 38 definition of an asset, its still very useful for internal planning and pricing decisions.
7. Make time to document. Describing the system and how we use it is turning out to be as important as developing it in the first place. Documentation includes a "how-to" manual, user tips, and a "style sheet" that describes our indexing and editing practices.
for information professionals
Taking advantage of the opportunities requires cross-functional teamwork, willingness to make the investment in developing an intellectual asset inventory system, and a willingness to rethink business relationships. Created on December 1, 1998 l Updated on September 4, 2012