Dark Side of Valuation, The: Valuing Young, Distressed, and Complex Businesses, Third edition

15

Invisible Investments: Valuing Firms with Intangible Assets

In the last few decades, we have seen a shift from manufacturing firms to service and technology firms in both the global economy and financial markets. The change has been greatest in the U.S. As we value more and more pharmaceutical, technology, and service companies, we are faced with three realities. The first is that the assets of these firms are often intangible and invisible—patents, know-how, and human capital. The second is that the way in which accounting has dealt with investments in these intangible assets is inconsistent with its treatment of investments in tangible assets at manufacturing firms, with capital expenditures often being treated as operating expense, when ...