“Include Intellectual Property in U.S. GAAP for Accurate Reporting!”

TLDR:

Key points:

• Financial Accounting Standards Board (FASB) currently does not allow for Intellectual Property (IP) to be recorded as intangible assets in compliance with U.S. Generally Accepted Accounting Principles (GAAP).
• Christopher J. Leisner, CPA, CMC suggests how FASB could change this to address a significant competitive disadvantage for U.S. companies.

Article:

The article discusses the importance of recognizing and measuring intellectual property (IP) as intangible assets on the U.S. GAAP balance sheet. The author, Christopher J. Leisner, highlights that IP, often resulting from research and development (R&D) expenditures, plays a crucial role in the competitive advantage of companies. While the recognition of intangible assets such as IP on financial statements can be challenging, it is essential for effective management and decision-making.

Leisner argues that many of the attributes of IP also apply to R&D and that both are intangible assets that are not currently recognized by the FASB under GAAP. This lack of recognition puts U.S. companies at a competitive disadvantage compared to their global counterparts who may include IP on their balance sheets.

The author suggests that by allowing for the recording of IP as intangible assets, FASB could provide U.S. companies with a more accurate reflection of their value and potential, enabling better management and strategic decision-making. This shift would align with the principle of “You can’t manage what you can’t measure,” emphasizing the importance of recognizing and measuring intangible assets for effective financial reporting.

Overall, the article calls for a reconsideration of the current FASB standards to address the growing significance of intellectual property in the modern economy and to level the playing field for U.S. companies in the global market.