artefacts), and customer capital One of the first companies in the (client relationships). These world that actually tried to quantify intangible assets or Intellectual their non physical assets in a Capital are to a high extent related coherent manner was a Swedish to relationships with the customers insurance and finance company, and suppliers, and with the Scandia. Leif Edvinsson, their employees and partners of the Intellectual Director, not only company. will” does not fully managed to quantify Scandia’s “Good encompass the real value of IC as invisible or intangible assets – we understand it. Sometimes IC is Intellectual Capital -, but also interpreted as the difference contributed to the increased between the book value i.e. the awareness of the concept of – historic value of the assets of a Intellectual Capital in Europe: company not yet amortized and – the market value which equals the perceived present value of the Quantification of Intellectual future cash flow of a company. Capital The lack of means to determine the Intellectual Capital is the sum of IC value of an investment everything everybody in a opportunity often makes company knows that gives it investment decisions very risky. A competitive edge. Unlike the assets company with a large share of IC, with which business people and which is not illustrated in line with accountants are familiar land, – the traditional accounting factories, equipment, cash – principles, and which has a high Intellectual Capital is intangible. It future earnings potential, can is the knowledge of a workforce, easily be wrongfully valued. The the training and intuition of a consequences may be under team. It is the collaboration the – capitalization and reduced ability shared learning between a – for the company to perform company and its customers, which optimally. forges a bond between them that brings the customers back again Measuring the acquisition and use and again. of knowledge assets excites great interest and great scepticism. Even In one sentence: Intellectual people who decry the inadequacy Capital is intellectual material – of today’s accounting worry about knowledge, information, putting untried, possibly intellectual property, experience – subjective, non-financial measures that can be put to use to create into annual reports. Corporate wealth. financial statements are clustered
artefacts), and customer capital (client relationships). These intangible assets or Intellectual Capital are to a high extent related to relationships with the customers and suppliers, and with the employees and partners of the company. “Good will” does not fully encompass the real value of IC as we understand it. Sometimes IC is interpreted as the difference between the book value – i.e. the historic value of the assets of a company not yet amortized – and the market value which equals the perceived present value of the future cash flow of a company. Intellectual Capital is the sum of everything everybody in a company knows that gives it competitive edge. Unlike the assets with which business people and accountants are familiar – land, factories, equipment, cash – Intellectual Capital is intangible. It is the knowledge of a workforce, the training and intuition of a team. It is the collaboration – the shared learning – between a company and its customers, which forges a bond between them that brings the customers back again and again. In one sentence: Intellectual Capital is intellectual material – knowledge, information, intellectual property, experience – that can be put to use to create wealth. One of the first companies in the world that actually tried to quantify their non physical assets in a coherent manner was a Swedish insurance and finance company, Scandia. Leif Edvinsson, their Intellectual Director, not only managed to quantify Scandia’s invisible or intangible assets – Intellectual Capital -, but also contributed to the increased awareness of the concept of Intellectual Capital in Europe: Quantification of Intellectual Capital The lack of means to determine the IC value of an investment opportunity often makes investment decisions very risky. A company with a large share of IC, which is not illustrated in line with the traditional accounting principles, and which has a high future earnings potential, can easily be wrongfully valued. The consequences may be under capitalization and reduced ability for the company to perform optimally. Measuring the acquisition and use of knowledge assets excites great interest and great scepticism. Even people who decry the inadequacy of today’s accounting worry about putting untried, possibly subjective, non-financial measures into annual reports. Corporate financial statements are clustered