An accountant is a practitioner of accountancy or accounting, which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources. Accountants measure and categorize the outputs, financial results, of a business.
The American Institute of Certified Public Accountants (AICPA) defines accountancy as “…the art of recording, classifying, and summarizing in a significant manner and in terms of money…” transactions and events that are at least partly financial in character, and interpreting the results. I’ve often told my accounting friends “You count everything that is consumed but you don’t account for what produces the value that is consumed“. Most agree.
Counting Value That Produces Results
We live in an Era where producing value is more important than producing things. Value consumption is the engine that produces results which need to be accounted for, the role of accountants. However there appears to be a void in accounting for what produces value. Value is the source that produces results in the Social Era. The source of value creation for any business, institution and even individually rest within this fuzzy thing called “intangibles”. Intangibles represent four distinct kinds of capital that while recognized for centuries has never been defined, measured or accounted for. The four distinct areas of intangible capital are:
- Human Capital: People, Experience, Loyalty, Learning etc.
- Relationship Capital: Customers, Suppliers, Brand, Market Sentiment
- Structural Capital: IT, Value Creation Processes, Knowledge Systems, Data, Technology, Intellectual Property, Management Processes such as Sales & Marketing, HR and Finance
- Strategic Capital: Business Model, Industry, Economy, Regulation, Competition
These four distinct areas of intangible capital are unique to each organization, institution or even a country, state or city. The collective value of intangible capital typically represents four times (4X) the tangible value that has been measured by historical accounting practices. Given the enormous under-utilized and under stated intangible capital we need a new professional practice, call it ICountants.
While accountants categorize, measure and track tangible capital ICountants categorize, measure and track intangible capital.Under current standards, accountants are limited in their ability to track the financial aspects of intangibles. In the coming years and decades, some of these standards will change. But there will always be significant non-financial aspects to intangibles.
ICountants are and will be needed to help business people identify, build and, yes, monetize the value of intangibles.. The act of managing by results has shifted to managing by values and the act of creating value has shifted from producing things to producing value. ICountants help organizations focus on measuring and using intangible capital which creates four times (4X) the value of tangible capital.
Smarter Companies provides ICountants with the tools and training to produce more value. Are you a Smarter Company?