Divisional performance measurement and transfer pricing for intangible assets

This paper examines the effectiveness of three transfer pricing methodologies for an intangible asset that is developed through bilateral, sequential investment. In general, a royalty-based transfer price that can be renegotiated provides better investment incentives than either a non-negotiable royalty-based transfer price or a purely negotiated transfer price, and in some cases induces first-best investment. This result contrasts with previous research that finds that the inability to limit renegotiation of initial contracts reduces investment efficiency. Further, I examine how tax transfer pricing rules inform optimal internal transfer prices when the firm decouples internal and external transfer prices.     

Discussion of “Divisional performance measurement and transfer pricing for intangible assets”

The conference paper by Johnson (2006, Review of Accounting Studies, forthcoming) develops an incomplete-contracting transfer pricing model with a number of novel features: taxation, sequential investments, and intangible assets being transferred. This discussion aims to disentangle these features so as to highlight those that are the key drivers of the results. Moreover, I show that some of the results can be generalized to settings involving a greater level of technological interdependency between the divisions.     

The measurement and recognition of intangible assets: then and now

“In the Fortune 500 there are thousands upon thousands of statistics that reveal very little that’s meaningful about the corporations they purportedly describe. At least that’s the verdict of a growing number of forward-thinking market watchdogs, academics, accountants, and others.”(Fortune, April 2001). In today’s economy value is often created by intangible (intellectual) capital. The accounting profession has not met the challenge of measuring and reporting the results of knowledge-based entities. The Federal Reserve Bank of Philadelphia estimates that in the year 2000 more than US$ 1 trillion was invested in Intangibles. The problems relating to the measurement and recognition of intangibles are international in scope.This paper reviews existing and recently promulgated US, UK, and IASC accounting standards relating to Intangibles. Inconsistencies in the measurement and reporting of Intangibles under US Generally Accepted Accounting Principles (GAAP) are highlighted, and evidence is provided that suggests that recognition of Intangible (Intellectual) Capital is in accordance with existing accounting principles In particular, the newly promulgated Financial Accounting Standards Statements on Business Combinations, Goodwill, and other Intangibles is reviewed. The objective of the comparisons to UK and IASC standards and the review is to provide evidence that will improve the measurement and reporting of intangible (intellectual) capital and facilitate harmonization. Improving the global financial reporting infrastructure will ultimately lead to the reporting of relevant and reliable quality earnings.     

Management incentives to recognise intangible assets

The paper examines whether the introduction of the international financial reporting standards (IFRS) in Australia changed management incentives to recognise intangible assets. We examine post‐IFRS changes in managerial opportunism and economic benefits associated with the recognition of intangible assets. We find evidence after IFRS of significant change in intangible asset recognition concurrent with share issues. We also find that the association between economic benefits and intangible assets changed following IFRS. Evidence is provided that the economic benefits associated with goodwill were enhanced by IFRS, whereas IIA and E&E asset information became less useful to financial report users.     

Value relevance of customer-related intangible assets

This study examines the stock market's valuation of customer-related intangible assets for a sample of publicly-traded U.S. firms. Customer-related intangible assets are found to be positively associated with equity prices, but valued at a discount relative to goodwill. These results suggest that value-relevant information is lost if customer-related intangible assets are subsumed into goodwill rather than being reported separately. This evidence can be useful to standard setters potentially considering extending to public companies a recent FASB Accounting Standards Update allowing private companies not to recognize separately from goodwill certain customer-related intangible assets.     

The association of identifiable intangible assets acquired and recognised in business acquisitions with postacquisition firm performance

This paper extends the literature evaluating accounting practices for identifiable intangible assets and considers whether the application of these accounting practices changed on transition to IFRS. It finds no evidence of identifiable intangible assets acquired and recognised in business acquisitions being associated with postacquisition firm performance or changes in postacquisition firm performance, either before or after transition to IFRS. This is inconsistent with the requirements of regulations such as IFRS 3 Business Combinations and IAS 38 Intangible Assets, and there is no empirical evidence supporting the present regulatory distinction between acquired and internally generated and revalued identifiable intangible assets.     

Measuring the strategic readiness of intangible assets

Measuring the value of intangible assets such as company culture, knowledge management systems, and employees' skills is the holy grail of accounting. Executives know that these intangibles, being hard to imitate, are powerful sources of sustainable competitive advantage. If managers could measure them, they could manage the company's competitive position more easily and accurately. In one sense, the challenge is impossible. Intangible assets are unlike financial and physical resources in that their value depends on how well they serve the organizations that own them. But while this prevents an independent valuation of intangible assets, it also points to an altogether different approach for assessing their worth. In this article, the creators of the Balanced Scorecard draw on its tools and framework--in particular, a tool called the strategy map--to present a step-by-step way to determine "strategic readiness," which refers to the alignment of an organization's human, information, and organization capital with its strategy. In the method the authors describe, the firm identifies the processes most critical to creating and delivering its value proposition and determines the human, information, and organization capital the processes require. Some managers shy away from measuring intangible assets because they seem so subjective. But by using the systematic approaches set out in this article, companies can now measure what they want, rather than wanting only what they can currently measure.     

谈谈以实物资产、无形资产出资的验证

一、投入的实物资产和无形资产应与生产经营范围相符 验证时要考虑企业章程或营业执照中规定的生产经营范围,核查其投入的实物资产和无形资产等是否与生产经营范围所需相符,如果与企业生产经营范围严重不符的实物资产或无形资产,即使股东之间认可且订有出资协议,一般也不能作为出资.     

客户资源无形资产及其评估方法

在市场中,客户相伴生产者和供应商而生。在作为生产者和供应商的企业被转让时,相应的客户资源也将跟随转移。如何评估客户资源的价值,企业转让中的交易双方对此都十分关注。本文拟就此阐述个人的一些见解。     

无形资产信息披露的问题和对策

在知识经济时代,无形资产地位急剧上升,无形资产计量对上市公司财务状况的描述起着决定性的作用.无形资产信息披露对于所有者、经营者以及其他有利害相关者无疑都是很重要的,因此,无形资产信息的披露应该做到充分、公开、真实与科学.     

Reporting intangible assets: Voluntary disclosure practices of top emerging market companies

This study is the first to empirically examine the applicability of the Value Chain Scoreboard™ proposed by Lev (2001) as an alternative disclosure framework for intangible assets (IA). The context of the research is the top 200 emerging market companies, which are the focus of increasing international attention. We empirically examine the extent of IA disclosures and find that emerging market companies do actively engage in voluntary disclosure practices to disseminate mainly quantitative IA information to their global stakeholders. Corporate-specific factors such as the adoption of IFRS/U.S. GAAP, industry type, and price-to-book ratio are key influences significantly associated with the level of IA voluntary disclosure. In addition, country-specific factors, including risks associated with economic policies and legal systems, are found to be significantly associated with the level of IA disclosure.     

The value relevance and reliability of reported goodwill and identifiable intangible assets

We examine the value relevance and reliability of reported goodwill and identifiable intangible assets under Australian GAAP from 1994 to 2003; a period characterised by relatively restrictive accounting treatment for goodwill and relatively flexible accounting treatment for identifiable intangible assets. Our findings, using an adaptation of Feltham and Ohlson (1995), suggest that for the average Australian company the information presented with respect to both goodwill and identifiable intangible assets is value relevant but not reliable. In particular, goodwill tends to be reported conservatively while identifiable intangible assets are reported aggressively.     

商业银行知识产权类无形资产的管理

知识产权是指人们可以就其智力创造的成果依法享有的专有权利,是基于创造性智力成果和工商业标记依法产生的权利的统称。     

Longitudinal value relevance of earnings and intangible assets: Evidence from Australian firms

Recent U.S. studies report that earnings value relevance has declined over time. Some authors suggest non-recognition of intangible assets in the U.S. is a major reason for declining earnings value relevance. However, the evidence is mixed on the effect of non-recognition of intangible assets. To examine this conjecture, this paper examines earnings value relevance for Australian firms since Australian GAAP has not prohibited intangible asset recognition. Using a variety of established models and specifications, our results indicate that for the average firm, there is weak evidence of decline in earnings value relevance. However, firms that capitalize intangibles have increasing earnings value relevance. Further, the magnitude of the difference in earnings value relevance between capitalizing firms and non-capitalizing firms is most pronounced in the latter part of the 1990s and this difference is increasing.     

The FASB exposure draft on accounting for business combinations and intangible assets: an instructional assignment

Accounting standards are constantly evolving to meet the needs of a rapidly changing business environment and changes in accounting theory. Accounting students need to be familiar with the content of Exposure Drafts, since these documents reflect the Financial Accounting Standards Board's (FASB) position on current financial reporting issues. Students are generally not well versed on the standard setting process and how contextual factors affect this process. The purpose of this instructional assignment is to enhance students' understanding of how contextual factors affect the standard setting process within the context of the Exposure Draft on “Business Combinations and Intangible Assets.” The assignment requires that students examine the Exposure Draft and answer questions designed to elicit responses as to why the FASB is considering a new standard and the impact the standard would have on current accounting procedures and financial statements.     

Risk-adjusted value allocation for (non-traded) assets with performance ratios

We propose a new valuation principle for possibly non-traded assets based on an implicit definition of a benchmark. The valuation principle allows taking (default and shortfall) risk constraints explicitly into account. The resulting risk-adjusted value functional is monotonic, positively homogeneous, partially concave and allows for an additive allocation of risk-adjusted values of non-traded assets in a portfolio. The valuation principle is applied to the problem of hedging and pricing in incomplete markets. Furthermore, accounting for non-traded assets is considered and we derive a risk-adjusted balance sheet for non-deterministic cash streams.     

Consumption correlatedness and risk measurement in economies with non-traded assets and heterogeneous information

A technique is presented for deriving equilibrium models of asset risk premia in continuous time models which does not require the complete solution of a consumer's continuous time stochastic control problem. The technique is used to show that even if traders have heterogeneous information about asset returns and/or there are non-traded assets, then the risk premium of a traded asset is determined by the covariance between the asset's return and the rate of change in per capita consumption. We only require the assumption that traders' consumptions and traded asset values form an Ito process.     

The performance measurement manifesto

The leading indicators of business performance cannot be found in financial data alone. Quality, customer satisfaction, innovation, market share--metrics like these often reflect a company's economic condition and growth prospects better than its reported earnings do. Depending on an accounting department to reveal a company's future will leave it hopelessly mired in the past. More and more managers are changing their company's performance measurement systems to track nonfinancial measures and reinforce new competitive strategies. Five activities are essential: developing an information architecture; putting the technology in place to support this architecture; aligning bonuses and other incentives with the new system; drawing on outside resources; and designing an internal process to ensure the other four activities occur. New technologies and more sophisticated databases have made the change to nonfinancial performance measurement systems possible and economically feasible. Industry and trade associations, consulting firms, and public accounting firms that already have well-developed methods for assessing market share and other performance metrics can add to the revolution's momentum--as well as profit from the business opportunities it presents. Every company will have its own key measures and distinctive process for implementing the change. But making it happen will always require careful preparation, perseverance, and the conviction of the CEO that it must be carried through. When one leading company can demonstrate the long-term advantage of its superior performance on quality or innovation or any other nonfinancial measure, it will change the rules for all its rivals forever.