Arguments Against Information as an Asset

In our previous article we established that information has the characteristics accountants look for in designating something as an asset:

  • It is acquired as a result of past events or transactions
  • It is owned and controlled
  • It can have an exchange value
  • It can generate future economic benefit

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?

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