Non-physical sources of value, intangible assets are generated by innovation, unique organizations and human resource practices. This asset class often interacts with tangible and financial assets to create shareholder value and stimulate economic growth. Yet they remain conspicuously absent from required disclosures.

Baruch Lev argues in this book that his lack of public information results in improved management of corporate assets contributes to a higher cost of capital and affords abnormally large gains to insiders at the expense of outside investors. To level the playing field, Lev proposes companies periodically release, in addition to the required income, balance sheet and cash flow statements, quantitative and standardized information most relevant to the company value chain or business model.

Specifically, he would require three classes of timely disclosure on what he calls the innovative and successful company's lifeline: Discovery and Learning, Implementation and Commercialization. Under Discovery and Learning, he would require disclosure of internal renewal, acquired capabilities and networks. For Implementation, required disclosures would include intellectual property, technological feasibility and Internet metrics. For Commercialization, required disclosures would include data on customers, performance and growth prospects.

These disclosures will transform the accounting profession from one that is essentially backward looking - how much was sold at what cost - to a forward looking - the creation of value enhancing assets. This recognizes that in the current knowledge-based economy, value creation or destruction precedes transactions, often by years.

Lev's proposed disclosures would compliment current disclosures, providing a reality check on the system of value creation or destruction as products, services and processes move along the value chain.

5 of 5 found the following review helpful:


One side of the story  Dec 05, 2004 By Christopher Macrae "intangibles mapmaker"
This book was published 2001 by Brookings as part of a pair; the other being Unseen Wealth

Lev's book comprised his view, whereas Unseen Wealth included about 20 views including Lev's

Lev is primarily concerned with helping the accounting industry fill its black hole; intangibles being the difference between market value and the tangibles that the 100 years rules of tangible accounting prescribe for. Formerly this blackhole was also known as goodwill.

The trouble is as the service and globally/locally networked economies compounded over the last quarter century, goodwill (or transparent trustflows of an organisation mapped in flows of productivities and demands and across to partnering organisations) became the larger dynamic explaining how most value compounds (both finacially and in human terms like learning, community, social progress that take more than 90 days to invest in and may have diverse views of development).

I dont find in Lev's book any answers to such issues as how to resolve the wicked assumptions that all tangible accounting revolve round. These include:

people are costs, only machines are investments

separate units, separate 90 day periods rather than want to map how they interact and compound in non-lonear ways

What is really needed for tracking, strategizing, transparently governing, leading, developing intangibles (and human relationships) is an opposite type of maths that value multiplies instead of separating out bottom lines as if everything in teh world adds up perfectly in 90 days periods. Whilst Unseen Wealth is clear about the magnitude of the Intangibles Crisis, Lev is not so clear. However, his work is the middleground and epicentre if you are looking at intangibles only from the perspective of what to do if you are intent on perpetuating the traditional accounting profession as nearly as possible as is.

4 of 4 found the following review helpful:


Excellent Overall - weak in Human Capital  Jul 23, 2001 By Matthew Barney "drmattbarney"
Overall, Lev has created a landmark review of the state-of-the science in Intangible Asset Valuation. I haven't found a better book on this very new area, particularly from an Academic Finance point of view.

My main quibble is with his lite treatment of human resource drivers of value. In making his conclusion, he places more weight on a working paper than he does on two peer-reviewed papers in good journals showing relationships between high-end HR practices and shareholder value.

Lev suggests nicely, though, how value gets created, and specific metrics (with empirical support) that are helpful in each part of the value chain. Rather than citing Kaplan & Norton, he creates his own "Value Chain Scoreboard". If he informed his approach with new ideas from Organizational Psychology (e.g. John Bodureau), Industrial Engineering and Marketing, and this would be 5 stars.

Overall, I like Jeanne DiFrancesco's (ProOrbis) ideas better for more concrete application of intangible value creation, measurement and optimal asset mix.

6 of 7 found the following review helpful:


An educational must for the smart businessperson  Aug 13, 2001 By Professor John R. M. Hand
This book makes a huge contribution to the intellectual and practical tool-kit of the smart businessperson. Smart businesspeople sense that intangibles can be the key to creating huge value in the New Economy. What Baruch Lev does so persuasively in his book is to clarify that general sense into sharp knowledge.

Intangibles have very different business attributes than do tangible investments in land, buildings, machinery, and the like. Baruch clearly and cleanly lays out the economic issues involved and summarizes the relevant evidence from a variety of business disciplines (a significant portion of which is from his own highly innovative research and real-world consulting experience).

The book is particularly accessible to anyone who has MBA. I've used the book successfully in my own teaching on the New Economy, and strongly recommend it to anyone interested in learning key insights about today's business environment.

2 of 2 found the following review helpful:


Concise analysis of intangible management  Apr 10, 2003 By Ingo Leung
The discipline of intangible management (knowledge management) has been around for decades; there have been many attempts in better understanding & management of intangible assets, with different perspective (organizational learning, technology, strategy etc). Lev has provided a very concise analysis of intangible management with an economics perspective. His analysis is very systematic, robust, with support of empirical studies; his treatment of the subject is coherent & enjoyable to read. But I find the recommendation part of the book slightly weak; the 'value chain scorecard' does not provide significant enhancement over Kaplan & Norton's balanced scorecard.

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