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Long-term view helps in finding true value of intangible assets

To measure the value of intellectual property and other intangibles, CPAs need to shift from a past perspective to a future-oriented one

Group of young adults having a conversationDebate continues over how to measure the true value of a company’s intangible assets, but CPAs can play a key role in solving the conundrum (kate_sept2004 / Getty Images)

In recent years, intangible assets have come to play an increasingly vital role in the global economy. 

In Canada alone, investment in these assets (which are generally understood to include everything from data and digital assets to innovation, patents, brand equity and talent) has outpaced that of tangibles since the mid-1970s. Moreover, the 2021 federal budget committed to investing in innovation and intangibles as a necessary way forward out of the pandemic. 

But how do you measure the value of assets that are, by definition, difficult to pin down? This has long been a subject of debate among policymakers, economists and accountants alike. 

Even so, experts stress that CPAs have a crucial role to play in creating, detecting and determining the value streams of these assets. 

Here are four ways accountants can help move the needle on this issue.


Assessing the value of intangibles is tricky for a variety of reasons, as outlined in a recent CPA Ontario report. For one, they are highly scalable, meaning they can be used by and benefit multiple parties simultaneously. 

Intangibles also do not depreciate in the same way that tangibles do, and established markets don’t exist for many categories that they fall under, says FCPA Rob McLean, president of MatrixLinks International Inc. and lead consultant on CPA Canada’s value creation initiative. It’s also challenging to attribute their ownership and debatable if they (i.e., human capital) should be “owned” at all. 

“Most intangibles, such as patents, data, or copyrighted documents, don’t have a lot of intrinsic value,” explains McLean. “Their value is contextual, and depends on the value streams they can enable for a specific organization.” 

The same intangibles can be worth more or less to one company over another, he adds.  Furthermore, he notes, while acquired intangibles can be recognized at cost, many intangibles are generated internally within an organization, so there isn’t a third-party transaction that can be used to attribute value.

As a result, as a 2021 McKinsey Global Institute report points out, the value of intangible assets only becomes apparent when an organization is sold and the market assigns a value to it. 

Since most intangibles are internally generated, they have been accounted for as an expense rather than an asset from a profit-and-loss or cost perspective. This, the McKinsey report states, leads to “suboptimal decisions.”


From a CPA’s perspective, assessing the value of intangible assets requires a shift in mindset away from how value is traditionally viewed, says McLean. 

“Originally, we thought that the question we should be answering is, ‘How do we get intangibles onto the balance sheet?’ But that is the wrong question. The right question is, ‘How do we measure the creation of value?’”

McLean explains that value creation for intangible assets can’t be measured based on transactions summarized in traditional financial statements. This, he adds, presents both challenges and opportunities for CPAs, as they move from a past perspective to a future-oriented one.

“The key for intangible value creation is that it happens in the future. The innovative things done today will not show value for some time,” he says. 

Therefore, both hindsight and foresight are needed to interpret how intangibles will contribute to the success of an organization, he adds. “We need hindsight to see where we’re coming from and foresight to essentially look to the future.”

CPA Chris Polson, partner, advisory & forensic services at PwC Canada, adds that CPAs are well positioned to consider risks and opportunities when assessing the worth of intangible assets.   

“A CPA can work with a company to say, ‘You have these intangibles, but they’re either not worth as much as you think, because of these risks, or they are because of these opportunities,’” he says.


Before making any value assessment, CPAs should first identify what intangible assets a company has access to or can potentially create, says McLean. These might range from patents, subject matter expertise, trade secrets, trademarks and brands to government licences, software investment, customer relations and talent pools. 

“Look for linkages between these intangibles to either strengthen existing value streams [such as sales, procurement or talent retention] or create new ones that don’t currently exist,” he says. 

Determining which intangible assets are most valuable to an organization is also important, adds Polson. This will depend upon several factors, including the sector it is in, the products or services it provides and its customers.

“The truth is, it will depend,” he says. “If you’re a pharmaceutical company, maybe your most valuable intangible assets are patents. If you’re a fashion business, perhaps it’s brand recognition.”

How the intangible assets relate to and interact with the organization and its stakeholders also helps to determine true value, adds McLean. For example, is the value of the asset tied to reputation, as it is with customer relations? Is it about future sales that can’t be accounted for until the product is tested and approved? Or insights from data collection that will be monetized in the future? All the way along the process, we are potentially creating value. We won’t know exactly what that value is, but we can model what we think it might be.” 


Debate continues as to how to account for intangibles from a balance sheet perspective. There is a global movement working to improve the status quo. The fundamental issues are when an intangible meets the criteria to be recognized as an asset on the balance sheet, and the method for determining the value that should be attributed to that asset.

For example, increasing transparency around intangibles is a top priority for the International Accounting Standards Board (IASB). Canada’s Accounting Standards Board is supportive of the IASB undertaking work in this area and agrees that the provision of “information about unrecognized internally generated intangible assets and an entity’s other value creation activities is important to users as it provides insight into an entity’s ability to generate future profits and cash flows.”   

“The good news is there is starting to be greater consensus in terms of the valuation frameworks used to measure intangible assets,” says Polson. “This will enable us to have greater consistency in how we analyze and evaluate intangibles, and increase the ability to compare them from one company to the next.” 

CPAs must keep up with these ongoing developments to carve out a path forward, adds McLean, noting that even when recognition of the cost of self-generated intangibles on balance sheets is substantially enhanced, the strategic question of how to realize their full potential to create value over the long run will persist. 

“Just as we are starting to look at 30-year GHG reduction curves, we have to get used to looking out 30 years or more and figuring out how we optimize the value stream curves for the organization and all its stakeholders,” he says. “That to me is the huge challenge and opportunity for CPAs.”


Find out more about how to identify and assess intangible value streams with CPA Canada’s Value Creation Decisions and Measurement Primer. And assess what data is worth to your organization with this CPA Canada report: What is your data worth? Insights for CPAs. Join an online discussion about value creation and other topics that will have a profound effect on the future of the accounting profession.