Most organizations are disciplined at both managing and measuring the value of (e.g. accounting for) their traditional physical and financial assets, and their workforce. But what about information itself, such as customer, supplier and employee records; transaction data, process control data, etc?
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Even if you have given any real thought to what an asset is, most of us untrained in the accounting arts think of an asset as something of value. While this isn’t untrue, it’s only part of the story. Let’s look at a few definitions:
You may notice some interesting nuances of what really comprise an asset.
First is the notion that an asset must be owned. OK, this is somewhat obvious, but it explains why a company’s so called “human assets” (employees) are not found on the balance sheet. There’s this little matter of the Emancipation Proclamation. In most civilized countries at least, people cannot be owned. In the US we are at-will employees (whether we feel like it or not some days!). Even though many companies manage their workforce with the same discipline as a true asset, it’s more accurate and appropriate to refer to employees as resources, not assets.
The second key characteristic to note is that assets don’t actually have value per-se, it’s more that they have a probability of generating positive future economic value. This means that even the most dormant asset sitting on a shelf somewhere has the potential to contribute toward generating revenue. So arguments about unused assets being valueless are just plain flawed.
So what about information? Information is owned and controlled by a business. Information has exchange value. Information can be used to generate future economic
Should enterprises, even accountants, consider information as an asset?
We look forward to your ideas and comments.
Frequently we hear information management professionals, particularly consultants, talk about trying to distinguish data from information, often even throwing knowledge and wisdom into the mix. We think we know what they’re really after (other than protracted consulting projects) — it’s a framework within which bits and bytes representing things, events and/or relationships are transformed from a less-consumable format into a “higher order” more usable or valuable format.
While it may be helpful to create conceptual cubbyholes in discussing the information value chain (or supply chain), can one really distinguish “data” from “information”? Is there actually some quantum jump in energy or a threshold a piece of data must exceed when it transforms into information? Probably not.
Certainly there is benefit in defining a continuum for acquiring, administering and applying information, within an organization–one that includes all of the ways (functions) data is captured, transformed, integrated and accessed/distributed. However, we have yet to see such a definitive D>I>K>W framework in practice, one that is actually adding value to information management initiatives, not just being bandied about on architectural slideware.
Perhaps you have. We’d certainly like to learn of any examples if they’re out there.
In our previous article we established that information has the characteristics accountants look for in designating something as an asset:
Yet arguments and resulting behaviors persist that information is not and should not be classified as or treated as an actual asset.
The first argument we hear is that “information assets are not found on the balance sheet.” Aside from the fact that this merely begs the question, it is also somewhat untrue. There actually is precedent for information assets showing up on a small corner of the balance sheet in a special circumstance. When one business acquires another, the estimated value of the acquired businesses’ customer list is factored into the premium valuation that gets lumped under the balance sheet fudge factor called goodwill. A customer list is nothing but data.
Another common argument against considering information as an asset is that it isn’t consumable like other assets. When we think about the most commonplace assets, physical and financial assets, there is a stark contrast. As physical and financial assets are consumed, they are depleted. But when information is consumed, it (or at least a copy of it) stays right where it was. But physical and financial assets are not the only class of recognized assets. A whole raft of intangible assets found on the balance sheet including copyrights, patents and even brand—none of which when consumed are depleted either.
Similarly, some argue that much information is too fleeting or amorphous to be considered an enterprise asset. But is information really that much less tangible than other recognized intangible assets? And although its probabilistic value may decline over time, sometimes quite rapidly, this is no different than applying a depreciation scale for any other physical or intangible asset.
One interesting argument is that information merely represents something, e.g. a transaction, a customer or an idea, but isn’t a “thing” itself. Again we might counter that patents represent ideas or processes; copyrights represent words, symbols or other media; brand represents reputation; and even financial assets themselves are an abstraction of any real consumable. Also note that “thingyness” isn’t a requisite asset characteristic.
Finally, some argue that information simply cannot be considered an actual asset because there is no way to place a value on it. We will discuss this in detail in future articles, but you have to acknowledge that if something as nebulous as a company’s brand can be quantifiably measured in economic terms, than anything can, even information.
Where do you stand on this idea?
“Information is one of our most valuable corporate assets.”
We frequently hear executives and business leaders spout this maxim or one like it. But is it just lip-service? Do they really believe this? More important, do they really act like they mean it?
If information were really a most valuable corporate asset, wouldn’t organizations manage it with the same discipline as other acknowledged corporate assets?
Physical assets are closely monitored and secured, and yes, so are many information assets. But experts in physical asset management implement policies and processes in their companies for asset planned and unplanned maintenance, inventorying, replacement, transportation, disposal, and safe handling. From manufacturers to retailers—companies that thrive on effective physical asset handling, they certainly do treat these assets as if they were critical.
Similarly, financial assets are managed with a certain precision and discipline. From the creation of portfolios to gauging risk to making investments, CFOs, treasurers and controllers have a well-honed scheme for their care and feeding.
Even human capital is managed with strict meticulousness in most organizations. The entire workforce workflow from recruiting through RIFs and retirement is carefully orchestrated to maximize the value of each employee to the business.
Business ancestry benefits us with hundreds of years of formally managing various forms of material, money, and men and women. Perhaps CIOs along with information managers, stewards and architects should spend a day on the factory floor, loading dock, accounting department and HR group counterparts to glean ideas that might apply to managing information assets.
What do you think they’d learn that can and should be applied to the discipline of managing information as a true corporate asset?
