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The importance of intangibles to organisations and the complexity of recording these in the financial accounts.

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  • Essay length: 998 words
  • Submitted: 19/06/2006
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University Degree Accounting

The first 200 words of this essay...

'The concepts and conventions of accounting provide very clear guidelines for the accounting of assets within the balance sheet'.

Knowledge is becoming the new engine of corporate development with fewer

companies relying heavily on tangible assets such as machinery and buildings to measure their value. Successful companies are more inclined to invest heavily in their employees and knowledge base, which prompts the question, How much are they really worth?. Intangible assets such as knowledge and patents are often over looked in company accounts whilst more forward thinking organisations have realised that these are an integral part of their business.

Historically the failure to include intangible assets in financial accounts has fuelled the confusion as to their precise description. Henderson and Peirson 2002 described intangible assets as 'rights rather than objects'. The International Accounting Standards (IAS) defines an intangible assets as an 'identifiable non-monetary asset without physical substance'. It would seem reasonable to expect a degree of inconsistency with regard to their treatment in financial accounts especially in light of the above definitions. The article from 'Accounting' magazine mentions the vast sums of money (£1m) spent by Consignia to change its name back to

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