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IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
IC Management - Measuring the Immeasurable
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IC Management - Measuring the Immeasurable

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For those looking for a better understanding of IC - Intellectual Capital - this is a must read. AREOPA is a leading edge knowledge and practice provider in Change Management, Risk Assessment, …

For those looking for a better understanding of IC - Intellectual Capital - this is a must read. AREOPA is a leading edge knowledge and practice provider in Change Management, Risk Assessment, Knowledge Management and IC Management. Contact us for more information.

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  • 1. IC Management<br />1<br />Developed for<br />Insert Client<br />Logo Here<br />Measuring the Immeasurable<br />Introduction, History & Overview of the different IC Models around the World<br />Confidential, not to be disclosed without written approval of AREOPA<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 2. The Challenge!<br />2<br />AREOPA sc - ICC&A – IC Accounting – Outlining the principles (sc20100310+MoU)<br />
  • 3. Why would anyone want to increase their balance sheet?<br />there are many reasons ...<br />Litigation<br />Transfer Pricing<br />Mergers and Acquisitions<br />Financing<br />Joint Ventures<br />Capital Markets<br />Purchase Price Allocation (PPA)<br />Enforcement<br />Bankruptcy<br />...<br />3<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 4. Importance of Intellectual Capital<br />Intellectual Capital = Intangible Assets – so what is changed:<br />Immaterial value of companies has greatly increased <br />relationships with business partners and brand awareness (relation capital), <br />ability to innovate (e.g.: R&D capital),<br />ability to multiply knowledge within an organization (structural capital)<br />Financial Accounting and traditinal management instruments are not able to capture these new values and report them!<br />An enhanced concept is needed for coporate reporting and new management tools, that will enable companies to manage these new drivers in a systematic way<br />Enhancing the capability of investors to better understand the value and the potential of the hidden intellectual resources of an enterprise in order to make better judgements about its capabilities to perform in the future.<br />4<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 5. Intangible Assets – some examples<br />Computer Software<br />Patents<br />Trademarks<br />Brand Names<br />Copyrights<br />Motion Picture Films<br />Customer Lists<br />Mortgage Service Rights<br />Licenses<br />Import Quotas<br />Franchises<br />Concessions<br />Marketing Rights<br />Customer/Supplier relationships and contracts<br />5<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 6. What Is Intellectual Capital?<br /> (some illustrations, not definitions)<br />... the sum of an organization’s patents, processes, employees’ skills, technologies, information about customers and suppliers, and old-fashioned experience ...<br />... an individual’s accumulated knowledgeand know-how [that] is the source of innovation and regeneration ...<br />... ability, skill, and expertise ... embedded in human brains ...<br />... knowledge that exists in anorganization that can be used to create differential advantage ... (Hugh MacDonald, ICL)<br />... intellectual capital that has been formalized, captured, and leveraged to produce a higher-valued asset ... (Klein and Prusak)<br />6<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 7. What Is Intellectual Capital?<br />Intellectual Capital is considered as the resource that creates invisible or intangible sources of competitive advantages such as networks and organizational systems.<br />... a combination of human capital – the brains, skills, insights and potential in those of an organization – and structural capital – things like the capital wrapped up in customers, processes, databases, brands and IT systems. It is the ability to transform knowledge and intangible assets into wealth creating resources, by multiplying human capital with structural capital (Leif Edvinsson)<br />7<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 8. What Is Intellectual Capital?<br />Many Insights, Opinions & Different Views<br />Accountants: how to measure IC and reflect it on a balance sheet<br />Information technologists:how to codify IC and put it in data bases and applications<br />Sociologists: how to balance power with IC<br />Psychologists: how to develop minds because of IC<br />Human Resource managers: how to calculate a ROI on IC<br />Training and Development Managers: how to build IC<br />8<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 9. Why is Intellectual Capital important?<br />The foundations of all the advanced economies have now shifted from an industrial base to a service and knowledge base.<br />This shift is nearly complete and irreversible.<br />Economic theories have begun to reflect this. There is still a lack ofconsensus around intellectual capitaldefinitions, management practices and accounting<br />Innovation accounts for more than half of the productivity growth worldwide and IC is the mother of innovation. As a key driver of economic value for every company, IC must be identified, managed, measured and protected.(Source: Gartner Research)<br />EU: Lisbon Agreements w.r.t. Knowledge Economy (+3%): How to measure?<br />9<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 10. Influence of the Knowledge Economy<br />Changed the Internal Business Economics of enterprises:<br />Financial capital efficiency is being replaced as success factor by human capital efficiency (which requires management to focus its efforts on the effectiveness of an enterprises structural capital as the means, to translate human capital into customer value)<br />Increasing number of “disruptive changes”<br />Tools required to actively manage the “purpose” and the strategy, i.e. the overall “value creating recipe”<br />Knowledge assets behave economically different than physical assets: increasing returns, network effects, larger risks, and ... changing the business economics of an enterprise<br />10<br />AREOPA sc - L&KM – The Knowledge Evolution (sc-KM S&M-BD20100320)<br />
  • 11. Extension of Performance Measurement & Control System is required<br />Democratization of capital markets and growing influence of institutional investors as well as the growing influence of other corporate stakeholders (employees, customers, business partners, activist groups/NGOs ...) <br />These relationships in essence become assets<br />Performance management and control system has to focus on all relevant activities for value creation and for creating “an effect” and “a difference” in the market<br />11<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 12. European Commission - Lisbon Agreement towards 2010<br />12<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 13. Knowledge vs Intellectual Capital<br />85%<br />15%<br />13<br />AREOPA sc - L&KM – The Knowledge Evolution (sc-KM S&M-BD20100320)<br />
  • 14. Creation of Organizational Knowledge<br />A company’s Intellectual Capital or knowledge base is usually determined as the sum of its:<br />human capital (talent)<br />structural capital (intellectual properties, methodologies, software, documents, and other knowledge artefacts), and<br />customer capital (client relationships). <br />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 (= Stakeholder Relation Management of the Extended Enterprise)<br />... Refers to the capability of an organization as a whole to create new knowledge, disseminate it throughout the organization and embody it in products, services and systems (Nonaka & Takeuchi)<br />14<br />AREOPA sc - L&KM – The Knowledge Evolution (sc-KM S&M-BD20100320)<br />
  • 15. Knowledge Resides in many Places ... and has many Faces!<br />Knowledge is in ...<br />presentations, reports, journals <br />licences, patents, licences, intellectual property<br />databases, software, risk tools, audits <br />libraries, catalogues, archives <br />manuals, policy documents, memos <br />individual ability, memory, know-how, experience <br />teams, communities, groups, networks <br />meetings, training materials, management info<br />Knowledge is ...<br />time critical, virtual, relevant now <br />reflexive, complex, evolving, interactive, serendipitous <br />messy, created for a purpose but drawing on experience from other times and places <br />social, often self-organising, achieved through question, challenge and debate <br />filtered, creative, selective<br />15<br />AREOPA sc - L&KM – The Knowledge Evolution (sc-KM S&M-BD20100320)<br />
  • 16. Explicit vs Tacit Kowledge<br />Explicit Knowledge<br />Easier to identify <br />Re-usable in consistent and repeatable manner - for decision-making and/or exercising judgement <br />Can be stored as a written procedure or as a process in a computer system <br />Stored as artefacts - artificial physical or virtual entity that can be measured, identified, distributed and audited<br />Tacit Knowledge<br />Lessons learned, little methodologies, cases, stories<br />Personal, context-specific, hard to formalise and communicate <br />Intuitions, rules of thumb, mind-sets, unwritten rules of turf and territory, unconscious values <br />Trivial fundamental philosophy <br />16<br />AREOPA sc - L&KM – The Knowledge Evolution (sc-KM S&M-BD20100320)<br />
  • 17. 4 Approaches for Measuring Intangibles<br />Direct Intellectual Capital methods (DIC): Estimate the $-value of intangible assets by identifying its various components. Once these components are identified, they can be directly evaluated, either individually or as an aggregated coefficient.<br />Market Capitalization Methods (MCM): Calculate the difference between a company’s market capitalization and its stockholders’ equity as the value of its intellectual capital or intangible assets.<br />Return on Assets methods (ROA): Average pre-tax earnings of a company for a period of time are divided by the average tangible assets of the company. The result is a company ROA that is then compared with its industry average. The difference is multiplied by the company’s average tangible assets to calculate an average annual earnings from the intangibles. Dividing the above-average earnings by the company’s average cost of capital or an interest rate, one can derive an estimate of the value of its intangible assets or intellectual capital<br />17<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 18. 4 Approaches for Measuring Intangibles<br />Scorecard Methods (SC): The various components of intangible assets or intellectual capital are indentified and indicators and indices are generated and reported in scorecards or as graphs<br />18<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 19. The Fundamental Dilemma<br />The main problem with measurement systems is that it is not possible to measure social phenomena with anything close to scientific accuracy<br />All measurement systems, including traditional accounting, have to rely on proxies, such as dollars, euros, and indicators that are far removed from the actual event or action that caused the phenomenon<br />This creates a basic inconsistency between manager’s expectations, the promises made by the method developers and what the system can actually achieve and makes the systems very fragile and open to manipulation<br />19<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 20. What could it mean for the Accounting World?<br />Importance of Intellectual Capital and Intangible Assets<br />Immaterial value of companies has greaty increased in the last two decades through:<br />relationships with business partners and brand awereness (customer/partner capital)<br />ability to innovate (e.g. R&D capital)<br />ability to multiply knowledge within the organization (structural capital)<br />Financial accounting and traditional management instruments are not able to capture these new values and report on them<br />What is needed is an enhanced concept for corporate reporting and new management tools that will enable companies to manage these new drivers in a systematic way.<br />This should enhance the capability of investors to better understand the value and the potential of the hidden intellectual resources of an enterprise in order to make better judgements about its capabilities to perform in the future.<br />20<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 21. International Accounting Standards (IAS)IAS 36 Impairment of Assets / IAS 38 Intangible Assets<br />21<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 22. International Accounting Standards (IAS)IAS 36 Impairment of Assets / IAS 38 Intangible Assets<br />22<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 23. 23<br />What this means for Accounting<br />IAS 38 – Important Factors - Intangibles<br />Key Definitions:<br />1. Identifiable = non-monetary asset without physical substance<br />2. Definite Life(*) (amortization) or Indefinite Life (no amortization)<br />3. Controlled by the Enterprise= acquired or self-created<br />4. Exception of Future Economic Benefits = based upon reasonable & supportive assumptions<br />(*) Life determined by:<br />Legal<br />Contractual<br />Judicial<br />Physical<br />Technological<br />Functional<br />Analytical<br />Economic<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 24. 24<br />What this means for Accounting<br />Intellectual Capital: (market value – book value) ?<br />The value of an organization is the sum of <br />(1) the physical tangible and financial capital which one finds on the company’s balance sheet<br />(2) the intangible assets of a company which are usually described as “goodwill” on the balance sheet<br />Sometimes IC is interpreted as the difference betweenBook Value and Market Value<br />book value = historic value of the assets not yet amortized)<br />market value = the perceived present value of the future cash flow<br />But there are so many different valuations ...<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 25. 25<br />What this means for Accounting<br />Intellectual Capital: (market value – book value) ?<br />Fair Market Value<br />Insurable Value<br />Collateral Value<br />Ad Valorem Value<br />Acquisition Value<br />Usage Value<br />Fair value (IASB)<br />Investment Value<br />Market Value<br />Forced Sale Value<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 26. 26<br />What this means for Accounting<br />How to achieve Intellectual Capital Calculation ?<br />The steps to value ...<br />Data collection<br />Valuation & Approaches<br />Economic Life Analysis<br />Value Method Conclusion<br />Reporting<br />Set Future Valuation Dates (some Goodwill Mandatory)<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 27. Intellectual Capital CalculationBuilding Blocks – elements/phenomena<br />27<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 28. Intellectual CapitalIdentification, Measuring and Reporting in Practice<br />Some of the Gurus<br />Internationally, a number of firms, practitioners and consultants have begun experimenting with various ways of identifying, measuring and reporting IC within organizations. <br />New breeds of internal and external accounting systems have emerged<br />Danish guidelines (Jan Mouritzen – Denmark)<br />IC RatingTM- Skandia’s Navigator (Leif Edvinsson - Sweden)<br />Intangible Asset Monitor (Karl-Erik Sveiby - Australia)<br />Balanced Score Card (Kaplan & Norton – USA)<br />Citation – Weighted Patents (Nick Bontis – USA)<br />28<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 29. Karl-Erik Sveiby’s Matrix on the Methods for Measuring Intangibles<br />29<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 30. IC RatingTM: The Swedish Model(Intellectual Capital Sweden)<br />Efficiency: the present value of IC efficiency in creating future financial value<br />Risk: threat against present efficiency * probability of threat coming true<br />Renewal and development: efforts to renew and develop present efficiency<br />The result is a rating of a company’s IC in a form that is very similar to how rating agencies rate the financial performance and capabilities of companies (e.g. S&P)<br />30<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 31. SwedenIntellectual Capital Report 1994 - Skandia<br />31<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 32. ICS: The Danish Model<br />Intellectual Capital Statement (ICS) – Since 01-Jan-2002 part of disclosure and accounting rules Denmark<br />“Knowledge narrative”: <br />broad purpose of the company, how it (wants to) makes a difference to customers and potential customers<br />what knowledge sources are required<br />the relationship between value and knowledge resources<br />Other elements:<br />Management challenges in the value creation process<br />Initivatives required to master these challenges<br />Indicators about the progress to these initiatives<br />32<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 33. DenmarkIntellectual Capital Report 2002 - Systematic<br />33<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 34. DenmarkIntellectual Capital Report 2001/2 - Dieu<br />34<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 35. DenmarkIntellectual Capital Report 2001/2 - COWI<br />35<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 36. AustriaARC Intellectual Capital Report<br />36<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 37. AustriaARC Intellectual Capital Report<br />37<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 38. AustriaARC Intellectual Capital Report<br />38<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 39. GermanyWissenBilanz (Knowledge Balance Sheet)<br />39<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 40. GermanyWissenBilanz - ACTech<br />40<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 41. United KingdomAnalyzing Intellectual Capital Statement<br />41<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 42. AREOPA’sIC 4-Leaf Model®– 15 categories<br />42<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 43. AREOPA’s Intellectual Capital CalculationExample – Non Structuralized Human Capital<br />43<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 44. AREOPA’s Intellectual Capital CalculationExample – Non Structuralized Human Capital<br />44<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 45. Areopa’s Positioning on Karl-Erik Sveiby’s Overview<br />45<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 46. Still too complex! Don’t know where to start!<br />46<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 47. AREOPA’s <br />4-Leaf Modelâ<br />IC Balance<br />Sheet<br />Added Value<br />Parameters-Variables<br />IC Assets<br />Process Clusters<br />Costs<br />AREOPA’s ‘Wheel of Fortune’<br />15 IC Areas<br />4 Plain – 11 Hybrid<br />47<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 48. The fundamentals of accounting<br />48<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 49. IC Accounting:the same principles apply<br />49<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 50. Knowledge Evolution<br />Distinction between EXPLICIT and TACIT knowledge:<br />KM = eK (da + sy + se + co) + tK (us + pr + ef)<br />Information management = - BITS & BITES + syntax = DATA + semantics = INFORMATION Explicit knowledge = - INFORMATION + context = KNOWLEDGE Tacit Knowledge = - KNOWLEDGE + use = KNOW-HOW + practice = EXPERIENCE + efficiency = EXPERTISE <br />Knowledge made available to the collective entity (EXTENDED ENTERPRISE): <br /><ul><li>to one (individual)
  • 51. to multiple (team / cross-team)
  • 52. to organization (company)
  • 53. to shareholders
  • 54. to customers (direct stakeholders)
  • 55. to external (external sharing and collaboration) </li></ul>knowledge needs to be defined ascompetitive edge or common/public qualified<br /> 85%<br /> 15%<br />50<br />AREOPA sc - L&KM – The Knowledge Evolution (sc-KM S&M-BD20100320)<br />
  • 56. Transition to Intellectual Capital<br />Integrating Change Management and applying the Knowledge Evolution, <br /> adding monetary value (currency) along each of the steps<br /> brings you to Intellectual Capital Management<br /> which in its turn covers IC Calculation and IC Accounting (reporting)<br />KM+ICA = [eK (da + sy + se + co) + tK (us + pr + ef)] x [value]<br />AREOPA’s KM & IC Model <br />Positioning on the Sveiby Matrix<br />Direct Intellectual Capital<br /><ul><li> Components identified
  • 57. Monetary valuation</li></ul>51<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 58. Intellectual Capital Valuation: Book Value<br />(Net) Book Value =(Acquisition Cost + Enhancement Cost(s)) – (Depreciation, Depletion or Amortization) +/- (Value Increase or Value Decrease)<br />General Accounting<br />Acquisition Cost or Historical Cost is the actual purchase price plus incidental costs incurred in getting the fixed asset in a condition and position ready for use, possibly supplemented with costs spend to improve, enhance or better the asset at a later stage. If the asset is self-produced: all direct costs (material, labour, expenses) and optionally an appropriate share of overhead costs (fixed, and variable) that can be assigned to the production of the asset.<br />IC Accounting<br />The book value of IC Assets can be assessed in exactly the same way as for Financial Assets: Historical Cost is the actual purchase price of the intangible assets which are bought (e.g. software licences, distribution rights, …) or the costs spend to ‘build’ an IC asset, such as training costs, R&D costs, marketing costs, etc… These costs can also be subject to depreciation or value adjustments due to special incidents or evolutions. Enhancement Costs are costs to sustain the value of the IC asset without which the value of the IC asset will “vanish” over time.<br />BV = (AC + EC) - D + (VI - VD) <br />BVIC = (ACIC + ECIC) )- DIC + (VIIC - VDIC) <br />52<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 59. Intellectual Capital Valuation: Future Potential<br />In addition to the Book Value of IC Assets we need to add a second portion which expresses the Future Potential (FP) of the IC Asset on hand. This FP will be calculated based on the 77 added value calculation formula’s of AREOPA’s 4 leaf model<br />If we use the basic resources(BV) in the businessprocesses they will have to create “added value“<br />This added value is calculated by using the 77 formula’s <br />53<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 60. Intellectual Capital Valuation: Total Value Equation<br />Bringing the 2 elements (Book Value (BV) and Future Potential (FP)) together allows us to complete the Total Value Equation of an IC Asset:<br /> whereby:<br /> and: <br />Each of these composing elements will have to be assessed, defined and computed while putting together the initial inventory of the IC assets of an organisation in preparation of the calculation of the IC value of all or a set of assets at preset intervals (monthly, quarterly, yearly) or the start of a continuous IC accounting exercise.<br />The most difficult part lies in the calculation of the future potential of each of the IC assets, since these potential margin contributions will depend on the nature of each asset and the parameters and variables “driving” the value creating potential of each individual asset. <br />TVIC = BVIC + FPIC<br />BVIC = (ACIC + ECIC) )- DIC + (VIIC - VDIC) <br />The formula’s which calculate the added value of the 77 phenomena’s<br />54<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 61. Managing Growth<br /> - Costs lead to Increase of IC<br /> - Increase of IC leads to Revenue<br />Revenues<br />D IC<br />€ Currency<br />Costs<br />Correlations<br />NO Correlation<br />time<br />55<br />AREOPA sc - ICC&A – IC Management – Measuring the Immeasurable (sc-IC S&M-BD20100310)<br />
  • 62. AREOPA IICARuS™ Framework<br />56<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 63. (Financial) Balance Sheet<br />57<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 64. Intellectual Capital Balance Sheet<br />58<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 65. Consolidated Balance Sheet<br />Assets are either Internal or External and vary fromhighly structured to not structured at all<br />Assets are:<br />either owned by the company (explicit)<br />or borrowed from 3rd parties: staff, customers,alliances, partners, public authorities<br />59<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 66. IC balance sheet: follows the structure logic of the financial BS<br />60<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 67. Consolidated Balance Sheet<br />Consolidated Balance Sheet shows the total value of the enterprise, combining financial with IC elements<br />The assets side gives a clear insight into the relative values of ALL assets, offering THE ultimate management tool to managers<br />The liabilities side shows how assets are ‘financed’, i.e. ‘who owns’ the assets<br />Balance Sheet analytics can be developed in line with BS analysis concepts which already exist for the ‘classical’ BS <br />61<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 68. AREOPA’s IC Accounting – in conclusion<br /><ul><li>Intellectual Capital is considered as the resource that creates invisible or intangible sources of competitive advantages such as networks and organizational systems.
  • 69. Ability to transform knowledge and intangible assets into wealth creating resources, by multiplying human capital with structural capital (Leif Edvinsson)</li></ul>AREOPA’s 4-Leaf Model®<br /><ul><li>Human Capital
  • 70. Customer capital
  • 71. Structural Capital
  • 72. Strategic Alliance Capital</li></ul>77 phenomena’s<br />IC Calculation: <br />(Net) Book Value (BV) + Future Potential (FP)BV= [(Acquisition Cost + Enhancement Cost(s)) – (Depreciation, Depletion or Amortization) +/- (Value Increase/Decrease)FP of IC assets calculated based on 77 added value calculation formula’s <br />IC Accounting & Reporting - ICARUS®<br />follows the structure logic of the financial balance sheet<br />62<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 73. 63<br />AREOPA’s experience<br />The effects of adding<br />Intellectual Capital Assets<br />to a Traditional Balance Sheet<br />5 – 12 times leveraged<br />When IC is applied<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 74. AREOPA has the IC calculator … ... you just provide the variables.<br />64<br />AREOPA sc - ICC&A – IC Accounting - Outlining the principles (sc20100310+MoU)<br />
  • 75. Go to Market – Intellectual Capital Calculation & Accounting (ICC&A)<br />Unique Selling Point<br />Today, the intangible assets of the knowledge economy become more and more important. AREOPA is the only company in the world offering a real monetary valuation system for intellectual capital calculation and accounting.<br />Entirely based on existing IAS 38 international accounting standard for intangible valuation. Total system based on classical accounting concepts, such as balance sheets and P&L statements.<br />AREOPA has developed a completely new accounting framework (ICARUS®) for this knowledge based economy, with new rules, journal entries, inventory valuation, etc. <br />IC Calculation (ICC) is based on the 4-Leaf Model®(Human Capital, Structure Capital, Customer Capital, Alliance Capital). An econometrics approach has identified 77 Added Value Creating Phenomena (AVCP), based on 920 parameters and variables. It defines the total IC value of an organization.<br />AREOPA’s expertise has been recognized worldwide (RICARDIS standard European IC calculation, GICS in Beijing, Stock Exchanges, Banks, etc).<br /><ul><li>Equity funds
  • 76. Venture Capitalists
  • 77. M&A specialists
  • 78. Investment bankers
  • 79. Commercial bankers
  • 80. IT companies
  • 81. Ranking companies
  • 82. Trade unions
  • 83. Intellectual property traders
  • 84. IP law firms</li></ul>Target Markets<br /><ul><li>Accountancy, financial & tax experts
  • 85. Auditors (external / internal)
  • 86. Companies listed on the stock exchange </li></ul>65<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 87. AREOPA – Origin on the name AREOPAGUS (Ἀρεῖοςπάγος)<br />The Areopagus or Areios Pagos is the name ofboth a low, rocky "Hill of Ares“ about 112m.high, north-west of the Acropolis in Athens and of an ancient court that convened there, which in classical times functioned as the chiefhomicide court of Athens. <br /> This court, representing the ancient council of elders (AREOPAgites), usually combined judicial and legislative functions and in the 5th and 6th centuries B.C. was a stronghold of the aristocracy and a sacred meeting place. <br />66<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 88. AREOPA = Provoking Innovative Intelligence<br />Provoking ... <br />creates change, innovation, intelligence, and new thinking<br />parameters of performance, benchmarking, communications<br />critical in the creation of new knowledge<br />key ingredient in<br /><ul><li>the excelleration of business performance, change, and
  • 89. the defining and delivery of customers demands.</li></ul>Innovative ...<br />learning as a key strategic tool for new strategies, innovation<br />significantly improving organisational effectiveness<br />innovative in deploying the creation of new knowledge and new practices.<br />Intelligence ... <br />AREOPA’s product portfolio embodies the leap from information to knowledge, from theory to practice, by giving meaning to the flow of information and involvement in organizational contexts.<br />67<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 90. AREOPA Founder & President Ludo Pyis<br />Ludo PYIS founded AREOPA in 1987. He started his career as a Management Trainer at General Motors. He joined Hewlett Packard in 1983 as a European Quality Manager. In 1988 he became the President of Atlas Consult.<br />Ludo is a visiting professor and guest speaker at several business schools and management institutes in France, the UK, Switzerland, Belgium, and Thailand. He is also a director of Excellence Partners N.V., an international business forum organizing seminars in Total Quality Management and Business Process Reengineering.<br />Ludo worked as a consultant and advisor to companies such as Volkswagen, Volvo, Mercedes-Benz, Henkel Europe, Rabobank, UCB, BASF, Hewlett Packard Consulting, Oracle, Tandem Computers, Olivetti, AT&T and many others.<br />Ludo is one of the members of the High Level Expert Group on Intellectual Capital, advising the European Commission on the establishment of guidelines and directions (RICARDIS – Reporting IC to augment R&D and Innovation in SME’s). <br />68<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 91. AREOPA – Provoking Innovative Intelligence<br />Unique organization<br />Shamrock Model based<br />We commit to results<br />We stay until attained<br />We resolve the real causes<br />Not symptoms<br />We consider the capacities of the client<br />Virtually no financial restructuring<br />We don’t just analyze & teach<br />We implement a proven strategy<br />69<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 92. General Overview of AREOPA<br />AREOPA – Provoking Innovative Intelligence<br /><ul><li>AREOPA is a leading edge knowledge provider,covering 5 ECO Zones Product Portfolio:
  • 93. CM = Change Management,
  • 94. RA&PP = Risk Assessment & Process Performance
  • 95. PSG = Public Sector Governance,
  • 96. L&KM = Learning & Knowledge Management,
  • 97. ICC&A = Intellectual Capital Calculation & Accounting
  • 98. Our maxim
  • 99. PROCESS DRIVEN, CUSTOMER FOCUSED.
  • 100. We practice our vision within our group and throughout the delivery with our partners, alliances and clients.</li></ul>70<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 101. General Overview of AREOPA continued<br /><ul><li>AREOPA – the ORGANIZATION of the FUTURE
  • 102. We are all entrepreneurs & shareholders
  • 103. We are fully empowered within the AREOPA network
  • 104. We are working in a customer driven organization
  • 105. We have no hierarchy, but we believe in leadership
  • 106. We have no fixed costs in our organization
  • 107. We use the Shamrock Model for revenue distribution
  • 108. AREOPA Group International – a global network of independent experts, collaborating in a closed virtual network(GNO = Global Network Operations).
  • 109. Product Development is organized in Knowledge Centres(AKC) by ECO Zone, while training is provided in regional Training Centres (ATC).</li></ul>71<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 110. General Overview of AREOPA continued<br /><ul><li>AREOPAproducts brought to market, include
  • 111. models & case studies
  • 112. methods & methodologies
  • 113. tools & techniques
  • 114. AREOPA also provides event speeches, seminars, workshops, trainings, coaching, scoping and assessments.
  • 115. AREOPA enables
  • 116. knowledge to be captured, stored and made reusable
  • 117. measurement and valuation of intangible assets
  • 118. through the use of over 20 years of experience by its founding members and a continuous growth of knowledge, methods and tools by our emerging AREOPA network of partners and alliances, and close collaboration with universities, academics, think-tanks and standard organizations worldwide.</li></ul>72<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 119. General Overview of AREOPA continued<br /><ul><li>AREOPA licenses its products and knowledge through Certified AREOPA Partners (CAP) and directly to multinationals & large corporations as AREOPA Enterprise Partners (AEP).
  • 120. AREOPA’s Strategic Alliance Managers (SAM) are the point of contact for any CAP or AEP. SAMs represent a geography and an industry/expertise. AREOPA also keeps a list of all active CAPs (consultancy service providers) which can be contacted by SME’s, NGO’s, government institutions and other potential clients.</li></ul> Challenging the KNOWLEDGE ECONOMY and bringing the standards of INTELLECTUAL CAPITAL to market.<br />73<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 121. AREOPA - Provoking Innovative Intelligence<br />AREOPA is the leading-edge<br />knowledge and practice provider<br />managing organizational change<br />creating leverage for our partners and<br />“excelleration” in business performance<br />For CUSTOMERS<br />Guaranteed predictable and sustainable results<br />AREOPA<br />Challenging the<br />KNOWLEDGE ECONOMY<br />and bringing the standards of<br />INTELLECTUAL CAPITAL to market.<br />74<br />AREOPA scINTRO – Introducing AREOPA (scS&M-BD20100210)<br />
  • 122. 75<br />

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