The evaluation process first starts with assessing the companies work processes and business model understanding in 15 different areas. Gaps are found between the company and the best-practices of competitors. The financial value of these gaps is also determined by knowing from a competitive dataset, how much book value similar entities are listing for each asset. See the “4 Leaf Model” figure.
Using a structured approach to filling the gaps and building long-term value creation enables companies to increase their balance sheet value by improving their business. Using such an integrated view of all forms of a company’s capital is a fast and effective tool for companies to evaluate their current business model. It is holistic and comprehensive. It reveals both issues and potential of a company.
When a company conducts such an IC assessment, it details the various assessment areas individually and in a summarized format. The report should include an estimation of current and future value of the company based on tacit vs. explicit knowledge area analysis and conversion potential. A full IC monetary calculation covers all the IC assets of a company ( 77 IC asset categories in total ). The assessment will also typically list main knowledge and IC gaps and problem areas identified in the analysis process, as well as a section of tailor-made recommendations in how to narrow or close these gaps.
A full new IC accounting system, called IICARuS ( Integrated Intellectual Capital Accounting and Reporting System includes IC journal entries, IC accountable events, IC ledger, IC valuation rules as well as IC accounting rules that are consistent with the IAS & IFRS 37/38/36 accounting standards. In these standards ”IC= added value minus costs”. In the past, the financial standard was to interpret many IC assets as costs but they are now redefined as added value, in keeping with the 3 basic criteria of the standards: (1) Identifiability, (2) Controllability, and (3) Future economic benefits. The “Integrated Intellectual Capital Accounting System” figure shows schematically how this is achieved.
Of importance to new ventures or companies is that using this framework, is the ability to identify more than 100 “ IC application areas”. These are detailed and proven areas where IC proves to be a big added value contributor. Based on tests with at least 200 companies per application, these high-leverage areas were ones where new companies can focus their energy to increase their valuations markedly between funding events, i.e. A, B, and C rounds.
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