For many companies, particularly in the technology sector, IP represents by far the single most valuable asset. However, there is currently little public information reported to investors about the composition and fair value of companies’ IP. If useful measurement information about IP assets can be developed and communicated to investors, it is likely to significantly enhance and improve investor’s perceptions of company value. Moreover, if a company can identify IP and assign fair value to it, the company can manage it, helping the asset realize optimum value.
The recent trend in accounting and financial reporting standards is to increasingly allow or require the use of “fair value” information to measure assets and liabilities reported in companies’ financial statements, in lieu of applying historical cost. This trend is being driven in large part at the request of investors and other users of accounting information to receive more relevant performance information. The Financial Accounting Standards Board (FASB) Statement no. 157 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”
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