Proceedings of the 3rd European Conference on Intellectual Capital

Maria Cristina Morariu
Tobin’s q developed by James Tobin (1969). The method is similar to market to book method
except for using replacement cost instead <strong>of</strong> book value (Wikipedia, 2010);
Intangible Asset Monitor developed by Sveiby (1997) Classifies IC into <strong>the</strong> three categories:
internal, external and individual competence. Provides strategic information <strong>of</strong> <strong>the</strong> firm. Difficult to
assign monetary financial values to <strong>the</strong> final measure (Bontis, 2001).
Our solution for identifying a market value for skills and capabilities and thus measuring IC relates to
outsourcing activities. Of course <strong>the</strong>re are skills and capabilities that can not be outsourced and for
which a market does not exist (Stanciu 2008), but we consider that for those services that can be
outsourced <strong>the</strong>re is market and <strong>the</strong>refore for those an objective and reliable value can be obtained.
How is outsourcing used and why do we need it to measure IC?
A7: In our view, by applying opportunity cost in combination with make or buy decisions, companies
should be able to identify, acknowledge and value IC.
Like with o<strong>the</strong>r assets, a company can decide whe<strong>the</strong>r for some functions it needs full time employees
and for o<strong>the</strong>rs outsourcing seams <strong>the</strong> best choice (Lepak & Snell, 1999). We consider that <strong>the</strong> cost <strong>of</strong>
externalisation can be used as a tool to measure <strong>the</strong> IC. For full time employees, <strong>the</strong> company can
ask itself how much would cost if o<strong>the</strong>r company would do <strong>the</strong> job. This cost should be compared with
<strong>the</strong> total cost company is paying for its employees. For those situations where <strong>the</strong> existing cost is
above <strong>the</strong> potential cost <strong>the</strong> company would have paid if outsourced, <strong>the</strong> company should ask itself if
outsourcing would be a better solution. If <strong>the</strong> answer to this question is negative, meaning <strong>the</strong>
company concludes that even if <strong>the</strong> cost it is paying is higher, <strong>the</strong> company still decides to keep its
employees, <strong>the</strong>n it means we speak about IC and <strong>the</strong> difference between those two costs should be
considered an asset in <strong>the</strong> balance sheet.
A8: we do not capitalize fully for IC, we recognize as an asset only that part that o<strong>the</strong>r companies do
not have. The part that can be outsourced is available to lots <strong>of</strong> companies and is not <strong>the</strong> company’s
individual asset.
3.5 Accounting treatment
If companies choose to recognize IC as an asset in <strong>the</strong> balance sheet (Dr <strong>the</strong> asset), it means we
shall need a credit item also, that can be a reserve that is unrealised and that is to be realised by <strong>the</strong>
moment <strong>the</strong> business is sold, or when is sold. How can a company ascertain whe<strong>the</strong>r IC has been
realised? How can a company calculate <strong>the</strong> amount to be transferred from unrealised to realised
reserves? These questions can be reformulated as it follows: how can a company ascertain whe<strong>the</strong>r
<strong>the</strong> benefits estimated to be generated when it recognised <strong>the</strong> asset, have been generated? How can
a company calculate <strong>the</strong> amount to be reversed? The answer to <strong>the</strong>se questions gravitates around
<strong>the</strong> level to which <strong>the</strong> company achieved <strong>the</strong> objectives set (balance scorecard), and we provide
below <strong>the</strong> steps we consider necessary to be taken:
1. After evaluating <strong>the</strong> resources <strong>the</strong>y have, companies set both financial and non-financial
targets on both short and long run for each <strong>of</strong> <strong>the</strong> four directions defined by Kaplan & Norton.
2. For each objective set, indicators are to be established in order to measure whe<strong>the</strong>r <strong>the</strong>
objectives are achieved.
3. For each objective <strong>the</strong>re is a department <strong>of</strong> employees that can significantly influence <strong>the</strong>
accomplishment.
4. Calculate IC to be recognised on <strong>the</strong> debit (outsourcing model presented above). The same
amount shall be assigned on <strong>the</strong> credit to unrealised reserves.
5. Annually, <strong>the</strong> company shall acknowledge where it stands comparing to <strong>the</strong> long term objective
and reverse unrealized reserves to reserves proportional with targets met.
4. IC disclosures
Reporting IC has been a challenging task for both reporters and for users <strong>of</strong> information. There were
several studies investigating <strong>the</strong> quantity and <strong>the</strong> quality <strong>of</strong> information that companies provide in
respect <strong>of</strong> IC and several studies carried out aiming to provide guidance with regards to <strong>the</strong>
information to be made available. Few examples <strong>of</strong> such studies are summarised in table below.
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