Fair value on commons-based intelectual property assets: lessons from Linux kernel case
Fair Value on Commons-Based Intellectual Property Assets
Jesús García-García & Mª Isabel Alonso de Magdaleno
Department of Accounting - email@example.com
Department of Business Administration - firstname.lastname@example.org
University of Oviedo (Spain)
4th International Workshop on Free/Libre/Open Source Software
Friedrich Schiller University, Jena
July 1-2, 2010
Baruch Lev (2001). Intangibles: Management, Measurement and Reporting.
Expense/Capitalize general framework
technological feasibility with
recoverability of development costs general realise
R&D phase pre-commercial phase
Valuing the Linux Kernel (1)
• Kernel development history from
• Main variables: SLOC (total,
added, modified and removed),
days of development, commits,
numbers of developers,
• EUROSTAT: Mean annual
earnings in high-tech manufacturing
and knowledge intensive high
technology services for upper
secondary and tertiary education.
Valuing the Linux Kernel (2)
a=3 b=1.12 ΠCi=1.55
Mean salary = 30,040€
Overhead cost factor = 2.4
Results validated developers observed
vs. developers predicted.
Linear regression R2=86.49%
Why to value commons-based assets?
• To raise finance
• To put a realistic value on business (know-how)
Similar to other assets • For taxation purposes
• To enable effective decision-making
• To report accurately providing true and fair view
Not for licensing IP to others
How to report?
Community Value Report
Corporate Social Responsability
No report, it's free!
Corporate Social Responsibility
• Self-regulation to monitor support to law, ethical standards and
international norms integrated into business model.
• Perspective broader than inmediate short-term profits.
• Growing support from academia, accounting profession and firms.
• Humanitarism, human development, ecology …
How to value?
Past value COST INCURRED: historical data
Initial booking value
Revised booking value (when needed)
MARKET PRICE: needs comparable transactions
INCOME: discounted cash-flow /net present value
Basic financial reporting frameworks
Financial Accounting Standards Board International Accounting Standards Board
GAAP IFRS - IAS
General Accepted Accounting Principles International Financial Reporting Standards
International Accounting Standards
Based on RULES Based on PRINCIPLES
What is an asset?
Value measured with reliability
Transaction in the past
What is an intangible asset?
IAS 38 Future benefits
So we would need ....
• An initial gross value
• Useful life and amortization rate, or ...
basis for determining an indefinite life
• Impairment losses (fair value)
• Reconciliation: additions, retirements or revaluations
Community Value Report
Community profile Who are the members and how do they differ from other
Potential to improve loyalty, generate new collaborations
and convert from other projects
Collaboration duration How often community collaborates on development
How and when members become loyal
What is the frequency of contact with community
Community role How community is involved in product design, production,
delivery or service
Community support What programs are in place to communicate and ensure
Community success How do customers purchase rate (if applicable),
downloads rate and overall satisfaction measure up with
• Not enough development on financial reporting.
• Commons-based IP assets provide competitive advantage not
reflected on financial statements and firm's value.
• Accounting framework is based on transactions, it does not report
external voluntary contributions.
• There is chance to generate intangible open source assets, but
additional research is needed to evaluate absence of exclusive control
and not existance of previous monetary transaction.
• Community Value Report may be a first step as voluntary disclosure.
Thank you for your attention!
It's time for questions and comments.