Study on the Measurement of Intangible Assets and Associated Reporting Practices

This Study concentrates on private-sector intangible investment analysing its causes, benefits, and the challenges it presents. The Study highlights several non-trivial problems in relation to current regulation and practices for internal and external reporting on intangible assets. These include the following: (1) we think we understand but need more empirical evidence on what drives enterprise resource allocation decisions between tangible and intangible assets; (2) we do not yet understand the links between patterns of enterprise strategic investment decisions and external competitive processes; (3) internal data collection appears insufficient, on average, to permit comprehensive identification and management of intangible investment; (4) external financial reporting regulations define assets to encompass all resources expected to generate future benefits, but exclude many intangibles with the reliable measurement rule; and, (5) separate agencies responsible for microeconomic data collection (external financial reporting) and macroeconomic statistical data collection, work in isolation without a common conceptual framework or data collection tools. The Study summarises theory and evidence suggesting the extent of possible distortions across sectors arising from these latter challenges and other related issues. It demonstrates the chronic measurement and reporting problems occurring in data collection at the macro level (e.g., broad-based measurement of macro indicators of intangible asset investment) as well as at the enterprise level. The Study also provides the basis for the European Union to contribute towards the development of an information infrastructure for measuring and reporting on intangible assets. It suggests in fact policy directions that should not only facilitate more relevant reporting of intangible assets, but also a set of the macro and micro policies that will encourage optimal investment in intangibles. These policies are directed towards increasing the competitiveness and growth of enterprises. However, for the latter policies to function the priority is to develop a sure and reliable measurement system.