Fast Company Jan. Feb. 2000 New Math for a New Economy by Alan W. Weber

This article concerns the opinions of Baruch Lev, Professor of Accounting and Finance at New York University's Leonard N. Stern School of Business as written by Alan W. Webber.

Mr. Lev feels that the 500-year-old way that companies use to keep their books is obsolete and should be abandoned for a more relevant system. He says that we are now in a complex business environment in which essential assets that create value have fundamentally changed. According to Lev, intangible assets have become much more important than the physical parts of a company. He also says it's extremely difficult to come up with a definition of intangible assets. He groups them into four categories; first product innovation such as R&D efforts, second, assets that associate with a company's brand, third, structural assets-smarter, different ways of doing business, and fourth, monopolies. He then spends 3 pages explaining how all the intangible parts of doing business are so important and should be considered in accounting.

I think his idea is one that every accountant certainly must think about. Who wouldn't want to say their company is so much better than any other because they have so much capital invested in R + D or marketing, or employer attitude management etc. for the average taxpayer this means nothing as far as putting numbers on a sheet of paper. We all invest and pay taxes. Taxes are based on hard numbers, not ideas, attitude, or thought processes. I believe if a company has strong intangible assets it will obviously be reflected in their bottom line thereby giving them value. Every profession has its lingo that the players use to express themselves. His rhetoric is fine for fellow accounts and managers trying to bend the accounting system to fit their personal whims, but for our investment and tax system to work, we need hard numbers. If someone comes up with a brilliant, new invention through R + D or company innovation it will definitely have a value and it will definitely appear in the hard numbers or our "archaic" system. I thought education was the only area that took old methods and ideas and changed the names and all of a sudden had a whole new approach that no one else ever thought of.

-- Anonymous, April 04, 2000