Ecotourism Is A Very Fast Growing Sector Tourism Essay

Ecotourism Is A Very Fast Growing Sector Tourism Essay This assignment is basically based on eco-tourism. Ecotourism is a very fast growing sector in todays  travel industry. Also known as green tourism, ecotourism is when people use to travel to a destination and take place in observing and interacting with the environment, learning about the cultures and practices of local inhabitants while promoting their well being. I have put together various articles relating to ecotourism. These articles include a study that reveal what makes up ecotourism and how it is being developed. The second article I will to look over describes how business travel organizers are more often considering ecotourism when they scheduling their events. Tourism is travelling for predominantly recreational or leisure purposes or the provision of services to support this leisure travel. The World Tourism Organization defines tourists as people who travel to and stay in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited. Tourism has become a popular global leisure activity. In 2004, there were over 763 million international tourist arrivals. Eco-tourism:  Ã‚   Perhaps the most over-used and miss-used word in the travel industry. But what does it mean?   The Ecotourism Society defines it as responsible travel to natural areas which conserves the environment and improves the welfare of the local people.   A walk through the rainforest is not eco-tourism unless that particular walk somehow benefits that environment and the people who live there.   A rafting trip is only eco-tourism if it raises awareness and funds to help protect the watershed.   A loose interpretation of this definition allows many companies to promote them as something that they are not.   If true eco-tourism is important to you, ask plenty of questions to determine if your trip will help conserve and improve the places you visit. www.untamedpath.com/Ecotourism/what_is_ecotourism.html Without getting too bogged down in theoretical definitions of tourism, tourist or the tourism industry it is very important to tell the differences between mass tourism and eco-tourism. Mass tourism should have the following characteristics: A concentration on high volume sales with throughputs and turnarounds The shifting of large groups of people en masse to specific developed destination Full utilization of packaged holiday components offered as a single product at an all inclusive price, often with a short term time period. Development of large scale transport systems, infrastructure accommodation, supporting facilities and attractions within destinations, usually at a fast pace and often supply led. Marketing approach is centred on the most hedonistic motives for travel, particularly the sun, sea and tourism products. The key for mass tourism are high volume, large scale, fast pace, hedonistic motives. Eco-tourism, on the other hand, needs to have the following characteristics Be a nature based experience Be low impact and small scale Promotes a conversation ethic Provides support for local communities Provides a learning opportunity Helps to maintain the natural and cultural integrity of certain tourism areas Utilises environmentally friendly techniques and technologies Eco-tourism has missed in past fifteen years from a convenient buzzword to an international movement. It is an attempt to balance the economic development of tourism with the conservation and protection of natural areas and traditional cultures. It underpins the very concept of sustainable development through tourism There are lots of benefits of ecotourism. If done right, there are lots more benefits  of ecotourism than any disadvantage valuable considering. Sadly, the  idea of  ecotourism has been advertised and abused by many people, organizations, and countries to reap profits for themselves. While there are lots of benefits of ecotourism to consider, we also need to consider the disadvantages of ecotourism. Most of the benefits of ecotourism cannot be corrected in our situation since the number of people taking beneficial of ecotourism is far larger than the number of people actually staying true to ecotourism and helping the environment. We can do our part in helping the environment and saving our natural resources at home, in our backyard, in our community and of course, we can help by educating people. Dont let the benefits of ecotourism make we be part of the scams and schemes that constitute the biggest problem in ecotourism. Its aim is to create the viable and sustainable tourism opportunity, and limit the effect that all related movements will have on the environment, while improving the lives of the public living in the place. According to Ecotourism the concept accords of a number of core principles, including: Minimising industrial impact on the environment, building environmental and cultural awareness, empowering local communities, increasing awareness of the political and the environmental and social issues of the country concerned. MAIN BODY In its original way eco tourism is purely nature-based, the adverse impact of tourism on the local culture having been, temporarily, over looked. However, it quickly became clear that when they trying to create a new tomorrow for tourism, to focus on wildlife and natural environment unique, simply did not work. It was also smoothly clarified that in those countries where the local communities where actively indulged in the eco tourism decision-making process there was that they got much higher a success rate, especially in terms of profit. As a result, todays eco tourism encloses the synergistic approach and I think Bulgaria is the best example where eco-tourism applies. Brief Introduction of Bulgaria Bulgaria, which was founded in 681 A.D., is the oldest state in Europe, but its roots reach far deeper into the past. In tombs adorned with frescoes and bas-reliefs in the Valley of the Kings, archaeologists continue to discover beautifully worked golden objects buried with Bulgarias Thracian forebears, some dating to 3000 B.C. Uncovering the countless burial mounds that dot central Bulgaria is a process started in earnest just a decade ago. In that short time, it has become clear that Bulgaria once was home to the worlds most sophisticated goldsmiths. The discoveries also have prompted local claims that it was here, in the shadow of the Balkan Mountains, that Europes first civilization was born. Traversing Bulgarias mountain ranges, which are carpeted with ancient forests and carved by mineral-rich Rivers, you can see why the countrys sophisticated warrior-artists chose to settle in its fertile plains. Bulgaria is a fascinating country, with a temperate climate that is more southern European than eastern. It is this gentle climate, along with a sweeping, sandy beach bordering the Black Sea coastline that continues to attract new visitors, the vast majority of whom arrive in high summer. Most of Bulgarias unique treasures lie hidden in the ancient tombs of the Valley of the Kings; in the mixture of Bulgarian Renaissance architecture and ancient Roman ruins lining the cobbled streets of Plovdiv; in the medieval university town of Veliko Tarnovo that rises precipitously from limestone cliffs above the winding Yantra River; and in the architectural museum towns snuggled deep in Bulgarias mountains. It is particularly the latter, their narrow cobbled lanes and alleys lined with 19th-century stone-and-timber homes, that define Bulgaria as an undiscovered gem. www.frommers.com/destinations/bulgaria/3535010001.html#ixzz18l6bNScq During the earlier phase of the project, work centred on developing systems to encourage sustainable natural resources conservation and management in and near Bulgarian protected areas, and by this management system to benefit local communities. As part of the protected area management application effort, the project applied a competitive group approach to destination development in some regions around two of Bulgarias largest parks Rila and Central Balkan National Parks. Activities involve eco-enterprise development based on non-timber natural resources harvesting, ecotourism destination development by community ecotourism associations, and significant amounts of public guidelines and organizational development. Sustainable tourism aims are addressed by the triple bottom line system that includes social well being, environmental protection and economic development. BCEG Project assistance give their hands in small, independent tourism providers and regional ecotourism associations to anatomise the national ecotourism market. Based on this activity, the Bulgarian ecotourism sector became more confident in its ability to cover a major portion of the European and other international areas. Ecotourism Monitoring ideas were produced in conjunction with Bulgarian National Park and participating ecotourism communities. This Guidebook is used by communities to choose and analyse indicators related to the triple bottom-line of social, environmental and economic growth. The nations first protected region management ideas were developed and approved through the Government of Bulgaria and are being used to guide in-park and outside-park tourism growth and management programs for two national parks and a world heritage site Rila Monasterys Nature Park. A National Ecotourism Strategy and Action ideas for Bulgaria was made and applied by three collaborating ministries under the Project, and presented to the President of the Republic of Bulgaria by the U.S. Ambassador in 2004. Twelve Regional Ecotourism Action ideas were created, and they contributed to the growth of a national ecotourism action ideas. A national ecotourism market survey was directed and used to aware product growth. Two ecotourism department were institutionalized near Rila and Central Balkans National Parks, and members were trained in hospitality skills, destination management, and membership development. many community ecotourism projects were made, and destination management ideas developed for two of these department. Public awareness was increased by the production and distribution of a national parks multimedia CD, mass-media outlets, and conservation education materials. The project helped significantly to national pride in Bulgarias culture and hospitality. It has made a base for tourism diversification, motivated concrete local initiatives toward application of ecotourism activities, relates the complementary motives of cultural and nature tourism, made synergies among donors, and has institutionalized a replicable growth process. The system of developing sustainable tourism strategies and application ideas has yielded many critical lessons: One is the need to clearly monitor and includes all key stakeholders in a strategic planning growth from the onset; it is important to build on present experience and perceptions, and to use these to build case studies materials for success. The ability to relate (at small scale) the activities of government, national authorities and local civil society was instrument to team-building and creating a common set of goals. Each understood they had an vital role to play in any successful ecotourism investment. In the absence of a full fruitful national policy, a partial national policy and many of political good will can do! Ecotourism in Bulgaria was able to capitalize on a changing national tourism development policy that, although centred on mass tourism, was open to form other forms of tourism market diversification. Advertising at national and local levels is not only imp ortant but critical to helping areas, government and even commercial banks, to better understand the opportunities for relating natural and historical resources to rural growth and economic growth activities. Those same information activities and centred campaigns are critical to the growth of a bottom-up system that is based on rapid, information sharing between stakeholders at regional level. Kamelia Georgieva, Bulgarian ecotourism important for the BCEG project, confirmed, Sustainable tourism growth is about social and political engineering, as well as enterprise growth. Public awareness is critical to support this system. Long-term technical and commercial financing helped to governments, NGOs, and the private sectors are needed to implement the sustainable tourism system. Sustainable tourism growth and marketing to national and, more importantly, international areas is important to careful but concerted ecotourism growth. Foremost centred on domestic tourism markets in areas where citizens have a culture of holiday and growing real income will increase the local confidence needed to spread into the global market. International marketing and global market growth are good opportunities for public and private partnerships. There are no better low hanging circumstances for relating common ideas, and shared costs and revenues. Protected regions and cultural landmarks must be saved from bad human impact related with distinct forms of tourism, including eco-tourism. When monitoring impacts and endorsing limits of acceptable use and change, they protected regions and cultural site managers must err on the side of conservation. The unsuccessful to do so can result in costly restoration agendas and the loss of culture and biodiversity. Therefore protected regions and site managers will work with others to: Develop a national process for the enjoyment and utilization of resources and sites that respects and sets boundary on use and change growth mechanisms that effectively endorse the management process. Analyzing threats to biodiversity and cultural and heritage sites and apply ways for mitigating those threats. Monitoring indicators and monitor changes in biodiversity and historical heritage. Implement official systems, standards and ways for the protection of natural resources (species, localities) and cultur al and historical heritage sites in the areas of major conservation value, both inside and outside the protected region network. Growth and utilize special training agendas for training on assessment of desirable change, and increasing the skills of PA administrations, heritage regions managers, representatives of the private sector in the region of eco-tourism, departments and government. There are a number of practical mechanisms growing in Bulgaria to help protected regions conservation and eco-tourism growth several have the capacity to financially benefit protected regions and eco-tourism entrepreneurs. Provisions to grow these mutually beneficial systems are still in their infancy and need to be further monitored and improved. There is a need to:  · Go on to monitor national legislation and reform it to allow fees to be collected from ecological activities to fund the conservation and maintenance of resources and sites of cultural heritage.  · Growth and legalize profitable financial systems that promote the initial goals of sustainable growth and nature conservation monitoring protected regions and eco-tourism financial systems models from other countries that employ the use of limited time redemption or commercial contracts  · Growth model shortens that serve to guide concession relationships, and endorsing their duration and operating systems  · Assign the profits made from these contracts to benefit the goals of nature conservation and local economic development  · Support the development of protected regions Fund to ensure continuing financial help for capital betterments and operating projects departments with a mechanism of protected regions in the country. The PAF would help capital investments, park development projects, cultural sites, and provide eco-tourism growth grants to communities that work in close proximity to protected regions.  · Assign central and municipal cultural funds, envisaged in the Law on Protection and growth of Culture, to help initiatives goals at conserving and using cultural heritage for eco-tourism. Theories Develop Clusters or Networks of Core Eco-tourism and Supply Chain Businesses at the International, National, Regional and Local Levels Scattered eco-tourism activities in the country could profitable from the exchange of information and cost savings related with a national network of eco-tourism providers. The scale of such a network is difficult to measure at the existing time and should evolve from a model that represents the advantages to network subscribers. Eco-tourism groups or networks could start within key areas of the country, growing into a national system. Improve the Entrepreneur Capacity of Businesses and Train Local Communities Providing Eco-tourism Services Many local scommunities with good capacity for providing and benefiting from eco-tourism do not have enough skills and experience to offering eco-tourism products and services to their clients. At a certain stage, small, rural communities are able to measure the advantages of ecotourism as an income generation way and as a municipal growth tool, but they lack the important means and skills to monitoring success. Hence, these communities require small and micro business growth assistance to develop entrepreneurial potentials. Expand Enter to Financing Mechanisms, Equity Investments and Other Funding Resources Circumstances for investing in and financing eco-tourism in Bulgaria are relatively undeveloped. The scale and costs linked to most rural eco-tourism activities and services are not of a enough size to capture much commercial banking help. The scale and location of many of these business growth activities are varied, and represent no logistic and administrative advantage to a commercial bank if they were interested. However, investments in a large number of small-size projects in major target regions, rather than in large-scale individual projects, are needed to grow rural eco-tourism. Eco-tourism financing faces various challenges, and government agency help combined with (a) business planning and best management activities, and (b) financial facilitation and guarantee programs, may provide solutions. The following systems are seen as suitable for advancing eco-tourism models. Facilitate the Development of Effective Small and Medium Eco-tourism Enterprises Small and medium enterprises play a vital role in sustainable growth. SMEs support meeting sustainable growth goals by generating and keeping income and economic improvements closer to home. They are more flexible and readily tailored to offering tourists with extra care or customized services. Implementation Local government engagement and leadership is key to the development and promotion of eco-tourism development. Effective implementation of the NETS by local governments will require:  · An understanding and capacity to develop eco-tourism as part of local government planning and operations  · Establishing local mechanisms for ensuring public and private sector engagement in focused eco-tourism development  · Selecting and applying financial mechanisms to support eco-tourism development, such as national budget, matching grants, public-private sector joint ventures, and links to large-scale tourism development  · Developing and implementing by- laws  · Creating and applying incentives  · Developing and implementing a system of monitoring indicators of success and impact A partnership between the Ministry of Regional Development and the National Association of Bulgarian Municipalities and the Foundation for Local Government Reform, the two national associations that address local government, will help to ensure that eco-tourism is a focus of local government and capacity building. Both the public sector and the national associations must agree to participate in completing the NETS. In doing so, they will build the capacity for their future role in its implementation. CONCLUSION Ecotourism is the future of tourism, but it will resolve the key issue of large-scale ecotourism. Depending on the time, there can be better ecological and economic benefits from large-scale ecotourism. There are already examples in Bulgaria where this is obvious. However, scale is a case-by-case decision. The fundamentals of ecotourism (given that it is taken as given it will be based on green productivity principles, in that it is nature-based, provides quality experiences, is enjoyable, and is profitable not only for the operators but the local community) do not change with a change in scale. Ecotourism is a move to counter this. Its objective is too made viable and sustainable tourism opportunities, and limit the effect that all linked activities will have on the environment, while improving the standards of the local people living in the area. According to Ecotourism.org, the concept involves a number of core principles, including is minimising industrial effect on the environment, building environmental and cultural awareness, raising awareness of the political, and social issues of the country concerned, and make sure that the experience is good for all parties, including visitors and citizens. The objective is to get sustainable and responsible tourism activities to the benefit of all and the detriment of none. One of the most essential factors in the success of any ecotourism program is knowledge. Those proposing the project should gain intimate knowledge of the location, the fauna, the flora and the communities living there. They should know how they effect on each other and how a change in one will affect the rest. They should understand the culture recognising the people relationship with the environment, and how they look the concepts such as land and water gathering materials for personal purposes. Eco-tourism is in its philosophy, centred on cultures, wilderness adventures, personal development and learning new measures to live. It is defined as go to destinations where the flora, fauna, and cultural heritage are the like minor attractions. Responsible eco-tourism involves programs that decreases the adverse impacts of traditional tourism on the natural environment, and improves the cultural integrity of local people.

Juno Formalism Essay

Juno’s pregnancy started her process of coming of age and showed how certain incidents start the process earlier then others. How the movie was constructed together by the leading each stage of Juno’s problems through the mood or tone of one of the four seasons, starting in fall, is parallel to how Juno blooms into the rebirth of new, mature person. Beginning in fall, Juno finds out that she is pregnant. The mood in fall is quiet and calm. Just like fall, Juno is also quiet about the whole incident. Instead of being open she went to the abortion clinic without anyone knowing to find more information about pregnancy. This also shows her immaturity due to her hiding her mistakes without telling the truth. This has made her begin her adulthood at an early stage than her peers. In winter, Juno has found a couple to take care of her baby and has become close to them. During this season is when Mark is beginning to have â€Å"cold-feet† about the baby and Vanessa and everything Juno has wanted to happen has gone wrong. The mood winter brings is that of sadness and depression. Similar to winter, Juno feels the same and feels a whirlwind emotions due to the Mark and Vanessa issue and he pregnancy . The problems she is dealing with can compare to â€Å"grown-up† problems that she needs to start to solve as she goes through adulthood. During spring, Juno gave birth. The mood in spring is relief. Relief from the dangerously cold air that winter has. Juno feels this relief when she gives birth. It is a sign of her completing her coming of age into adulthood. In the transition into summer, Juno and all her problems perceive to be gone. The pregnancy and adoption problems are over and she and Paulie are in love. The mood in summer is happiness. In the ending scene, the mood is evident when they are singing in the early summer mourning without care of anything. This is also shown by Paulie’s ending devotion to track. Juno’s experience, though she wasn’t prepared for it, actually helped her become a more mature adult.

Strategic Customer Management And Solutions - 1617 Words

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Renewable Forms of Energy Wind Energy Essay - 1320 Words

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Accounting Treatment of Intangible Assets Free Essays

Accounting Treatment of Intangible Asset Draft Pace University ACC692 Summer I By Yigal Rechtman July 30, 2001 Introduction What is the problem? Accounting for intangibles has gained prominence in the past few decades due to changes in the way the business world operates. The technological revolution and in particular, the information age, has brought intangible resources to the fore of the business environment. Businesses ( even the most traditional production manufacturers ( are moving towards an information age where a competitive edge is increasingly linked to resources other than the fixed and liquid assets as understood by Generally Accepted Accounting Principles (GAAP). We will write a custom essay sample on Accounting Treatment of Intangible Assets or any similar topic only for you Order Now Some research has shown that accounting for Intangible Assets (IA) – a general term that will be defined and separated later – will fulfill the accuracy requirement of the accounting functions and reports. Other research has shown that accuracy will have to be traded off with relevance of the accounting functions and reports. Still other research claims that neither accuracy nor relevance are served by accounting for resources that do not meet the current definitions of Assets under GAAP. Accordingly, there are two questions regarding the accounting for IA: 1. Should the Generally Accepted Accounting Principles recognize as financially relevant and accurate events that arise from IA? 2. How should GAAP account, process and present these IA related events (if the answer to question number 1 is positive. ) Question number one is answered in the positive: the existence of IA in the current business environment is proven in repeated investigations. Further, the economic effects of IA on corporations has shown that not disclosing or accounting for such resources amounts to miscomunications regarding the activity and financial state of a business. The research that was used in this paper has shown that Intangible Resources are increasingly a factor in the business world. Intangible resources, as will be discussed below, is a super-set group of strategic elements that contribute to the success of a business. IA, in turn is a sub-set of the Intangible Resources. The paper intends to explore the current range of thinking relative to IA and how such resources should be valued, recognized and presented in the financial reporting of U. S. companies. The question of how to account for IA poses different challenges, some of them related back to the answer of the first question. As this paper will show, recognizing IA on an entity(s books can be seen as a natural next step, especially for certain knowledge industry type businesses. However, the challenges to the issue of recognition remain: how to determine IA in a meaningful manner? How to report IA and what are the possible ramification of alternative accounting treatments? Scope and Method of Exploring the ProblemScope and Method of Exploring the Problem The process of finding information about the topics relating to IA, and obtaining an understanding of the issues, involved an introduction by means of participating in a conference on the subject and obtaining complimentary readings of published articles. The Third Annual Conference on Intangible Assets, sponsored by New York University(s Ross Institute produced a documentary of the presentations, which were used in this paper. Additional published material was obtained through the ABI-Inform database, by searching for (Intangible Assets(, (Intangible Accounting( as well as (Assets Valuation( and (Appraisal, Intangibles( for the years 1976-2000[? ][i]. The search was limited to articles available in full form on line (versus articles in which only the abstract is available on line. ) This paper refers to twenty articles that were obtained through ABI-Inform and ten articles from presenters at the NYU(s conference. Two points should be made in terms of the scope of the discussion. First, the discussion includes IA as it is captured and presented for external, possibly audited, users of the entity(s comprehensive financial statements. Unless otherwise stated, financial statements herein are presented with conformity of United States( Generally Accepted Accounting Principle (GAAP). Within the latter confines, estimates such as amortization and useful life of an Intangible Asset (IA), although a valid issue, will be generally out of the scope of this paper. The reason for the limitation is that for cash flow purposes, as well as for balance sheet analysis, such estimates represent regulatory requirements and provide little by way of capturing the essence of the issues surrounding IA. Therefore, the ultimate purpose of this paper is to venture out of the confined safety of U. S. GAAP and investigate what other isms are possible for presentation of a Statement of Financial Position which incorporates intangible assets. The method of this paper consists of discussing the three criteria which are used to assess the alternatives to accounting IA: valuation, recognition and presentation. Each of these criteria is measured on a scale from 0 to 100 (alternatively, from 0. 0 to 1. 0) to show the extent of the departure of the alternative from the currently accepted method, usually the Generally Accepted Accounting Principles. Because Goodwill is already an established IA under current accounting rules, it will be discussed first (for each criteria) to show the extent of the existing treatment. Although other IA such as Human Capital or Patents exist, they are often either unaccounted for or simply replaced by a generic (Goodwill( entry on the books. Although they are all intangible resources[? ][ii], it can be shown that not all are Assets (as defined herein). This paper will also explore the possibility that, perhaps intangible assets such as Human Capital should not be substituted for by the generic (Goodwill( entry. Definitions Some unclear, overlapping and unstructured definitions occupy the set of IA issues. in turn, some researchers have used inconsistent definitions of IA, reducing the transparency that accountants and financial experts have to discuss these issues. Although excellent analysis has been published, such research is often not consistent in scope or definition to other frame work and conceptual essays that are contemporarily published. Therefore, aside from giving this (creature( a proper name, and calling all its parts using the same taxonomy, coupled here from various sources. The dictionary defines IA as (an asset that is saleable though not material or physical([? ][iii] and (Intangible: †¦ an asset that can not be perceived by the senses†¦ such as Goodwill or dedication([? ]. According to the FASB, an internally generated IA is proposed to be defined[? ][v] as: (1) a past event that has a (2) measurable effect and that presents a (3) future benefit. The FASB Special Report[? ][vi] states that there is not a need for different rules of recognition for internally and externally generated IA. The FASB clarifies that internally generated IA is simply an (Asset( without a physical presence, nor does have to it be an external acquisition: as long as all three tests are conformed with, any business event or process can produce an IA. The FASB further notes that there is an embedded conflict in this definition because it contains a departure from the (historic cost( principle. The move to a (forward looking( definition is defended by the FASB in making an argument for further disclosure, not a modification for the format and content of the existing presentation rules. In this presentation, for the purpose of defining IA (internally or externally generated) the FASB definition will be applicable. Intellectual Capital (IC): A business entity uses three types of capital: physical, financial and intellectual[? [vii]. Intellectual capital (IC) is defined as an intangible asset that is not financial or physical and that has been (formalized, captured and leveraged to produce a higher-valued asset([? ][viii]. The raw material, captured and formalized in the process of capitalization of IC, is knowledge. Knowledge resides within an individual, a group of individuals or entity-wide. Knowledge that is structured in a formal manner (usually with an information system, computerized or otherwise) is just data. When it is purposeful and useful, data is considered information. Information made use of is knowledge[? ][ix], which can become an IC. In the discussion of IC, several disaggregation of IC exist. For the purpose of this discussion, the following categorization will suffice as (all inclusive(. This paper does not intend to be exhaustive in its definitions. It can be shown that other examples of IC can be found (and the definition extended) without diluting the effect of the issues at hand. The classification proposed in this paper uses the following examples of IC: Human Capital, Intellectual Capital and Structural Capital. Human Capital (HC) is arguably the most elusive from accounting for in financial or quantitative terms. Some[? ][x] argue that HC is the most active value driver in the business world today. Intellectual Capital (InC) has been at times presented under different names, too: (Patents and brand names[? ][xi]( or Social Capital (the latter is a definition of a hybrid of Human Capital and Organizational Capital. ) InC, abstractly is intellectual property that stem from (or relate to) innovation within the entity(s business. Structural Capital (SC) can be better described that defined: SC is any leverage that can be described in terms of the relationships of functions within the organization and the leverage of entities outside the organization. For example, a customer base relationship – qualified or quantified – is a SC that can be portrayed as an external relationship; an Enterprise Resource Plan (ERP) that allows departments within a company to facilitate resource allocation is an instance of SC. Goodwill: Goodwill is arguably the most conforming IA to GAAP: It is the excess of Fair Value (FV) over Book Value in a purchase transaction. Currently, treatment of any of IA has been confined to Goodwill produced on the balance sheet from acquisition under the purchase method. As the only allowed IA capitalization, Goodwill appear in many studies pertaining account for IA. For GAAP purposes, three tests are applied to allow recognition of an event as an Asset: 1. the event is a past-event, 2. it is measurable and 3. it contains probable future benefit. Goodwill passes the (past event(, (measurable effect( and (future benefit( tests. The reason Goodwill can be seen as a past event is that it is easy to date the creation of an acquisition under the purchase method where the fair value (FV) of an acquired entity is lower than the adjusted basis (AB) to the acquiring entity. Goodwill arising from a consolidation, merger or takeover transaction has produced inconsistent definitions of the (other( classes of IA. For example, at times a well trained workforce is describe plainly as (unrecognized Goodwill( due to the disallowed recognition under GAAP (the proper classification for such a workforce is HC). Although this paper is not intended to disprove these notions, definition clarification can aid in seeing the general direction of accounting for IA Evaluating possible answers to the question of Accounting Treatment of Intangible Assets Treatment by an accounting method is based on Measurement, Recognition and Reporting dimensions. In order to present these dimensions, this paper will attempt to survey the range of possibilities and plot them on three dimensional coordinate axises of possibilities: 0 being the most conservative point and 100 being the most (daring( in terms of relevance and accuracy. Thus, the treatment of IA can create a multi-dimensional view of the accounting classification, reporting and even auditing. Imagine a three dimensional cube with an X, Y and Z axises. On the X axis spread are the ideas about recognition of IA. On the Y axis we shall plot the various metrics (measurement) that are proposed for IA. Finally on the Z axis will lie the proposed solutions for the presentation aspects of IA. The difference between recognition and metrics should be explored further: metrics are the models upon which, ultimately, monetary amounts are made available for classification. Recognition, on the other hand, are the issues that mandate the accounting perspective of the monetary (and possibly non-monetary, too) information that can be captured. The matter of presentation touches on the financial statement and the disclosure issues that surround IA. Measuring and Valuing Intangible Assets Goodwill measurement is the only existing allowed GAAP-related event. The measurability of future benefit from Goodwill is based on known measures of financial events, namely the Adjusted Basis (also known as Book Value, or AB) and the Fair Value (FV). In a Goodwill event, the FV is the purchase price. The AB amount is discernable; the FV amount can arguably be changed according to market and strategic conditions. This discussion will assume, however, that FV is a fixed amount, available to accountants and the public. Therefore, Goodwill is an excess between two set amounts, Fair Value (of assets acquired) and Adjusted Basis (paid by acquiring entity). By definition, this is a measurable amount. Realizing Goodwill can be stated this way: the reason an acquiring entity is willing to pay more for the acquired entity more than the estimated assets( FV is because of difference of assumptions in the definitions of FV. Therefore, the FV to the acquiring corporation is different than the FV to the acquired corporation: the former sees future cash flow that is greater than the cash flow seen by fundamental look at the balance sheet of the acquired entity. In a sense, this is a statement about the value of the effect of (gamma( ( the effect of (growth( ( in the example given elsewhere in this paper (see Appendix). Thus, the acquiring entity sees a measurable amount of inflow of cash that can justify the excessive cost up front. Current research indicates that IA and, in general, non-financial events are measurable. The main conflict is deciding on which model to rely on, and moreover, which model to use as a standard measurement. The problem with measuring IA is that such measurements are too specific to an industry and perhaps to a particular entity. Research yields plenty of data showing how measurements can be conjured up to measure certain non-financial, intangible events. For example, measurements models exist to quantify information[? ][xii], or the value of business alliances[? ][xiii], et cetera. These models show that values of quantity, rate of growth and other statistics can be obtained at a feasible cost[? [xiv]: (existing techniques and expanded use of nonfinancial metrics seem to offer a more cost effective solution. ( However, the FASB Special Report states that making such proprietary measurements useful for general purpose accounting and financial reporting is not likely. The problem with value models or future-inflow metrics is that they are estimates. Like depreciation schedu les, valuation methods are based on assumptions. Because they often include not just one or two variables but numerous independent variables, the number of assumptions grow at least in linear proportion to the number of variables. For example, a Human Resource valuation model by Skandia, an insurance and financial corporation (Sweden) has been criticized for having up to 140 variables[? ][xv]. Unlike depreciation, which requires disclosure of one or two assumptions, disclosure of such complex models, even if they include only 5 to 10 variables, can be quite unfriendly to the user. Furthermore, a multi-variable model is generally susceptible to greater risk of contradicting of any of the assumptions, leading to invalidating the results of the entire model. Generally, measuring IA is a departure from historical cost[? ][1]. GAAP requires that the cost, or past event principle, guide any valuation. This requirement is in keeping with GAAP(s frame work of conservatism. When an IA is appraised in value it becomes a forward-looking measurement which is not compatible with other elements of GAAP. Future Value is the opposite of the principle of reliability in GAAP driven financial reporting: the accuracy of past events reported is the crucial element of its reliability[? ][xvi]. However, value projection can be manipulated to create certain effects. For example, a projection can be made by Management (and included in a financial report) about the future effect of a certain Internet domain name that is owned by a company, such as (money. com(. The projection is unique enough that it cannot be verified by other sources. In order to have measurability of IA, a compromise between the forward looking and historic cost principles is sought. Seemingly, past-based and future based measuring can not be consistent. It may be possible however to reconcile the projective nature of valuating IA and the required verification by historic cost in GAAP by creating an appraisal mechanism. Arguably, appraisals can be done by means of three approaches[? ][xvii]: cost, comparable market or income. Approaches used in Appraisals: Approaches used in Appraisals The cost approach estimates the value of an asset at an arm(s length transaction; this approach is inapplicable to IA; for example, HC is not measurable or even possible to conceive as an (arm(s length( transaction. Goodwill, also by definition, can not be an (arm(s length( transaction because an excess is paid by a purchaser above the FV of an acquired target. Similarly, SC can not be assessed this way because of its unique, untransferable characteristic. The market approach states that appraisals of similar purchased (or sold) goods or services can be a basis for estimating the value of the transferred property. Although a model for HC or InC can be built based on the market appraisals approach, SC can not be fit into a model that includes transferring assets in an exchange. IA of that nature loses its value in such a transfer. The income approach is most fitting to the accounting use in terms of IA. Present Value analysis is available and established within GAAP as a model. Its application in an IA valuation depends on the class of IA. Goodwill, for example, is inherently suited to the income approach valuation: the excess over FV represents the purchaser(s belief in enhanced cash in flow over a known (fixed) length of time, such that this inflow will surpass not only the declared FV but also the (higher) purchase price. However, SC has little known useful life, as does in part InC. For example, a distributed warehousing corporate structure, or a Just In Time production process can not have a reasonable income based appraised value because their useful life is not known, nor can it be averaged in the same way that for example, investment in employee training (HC) can be. However, HC is not completely compatible with the income approach, either: employee satisfaction and loyalty (both IAs) are similar in concept to the element of (going concern( because once HC(s useful life is in doubt, the going concern of the entity is generally in doubt, too. Users of financial statements are often wary of appraisals as they represent – at best – a range of possibilities. Consequently, an approximation of value diffuses the utility of fundamental analysis of the financial statement in question. At worse, appraisals represent a biased, subjective and diverted view point of the management. Even in an honest attempt to value an IA, a range must by provided or alternatively, a tradeoff measure of (confidence level( accompanies any so-called (fixed( dollar amount. In any way, an Appraisal[? ][xviii] does not produce a consistent monetary measure. On the Y axis all appraisals are at the high read: unsubstantiated, (daring() end, at Y=90. A (Real Options( valuation model describes a series of future inflow of cash (or other benefits or desirable effects, such as employee morale) in a recursive manner: the first event (event number 1) in the series is an evaluation of the chance that a successful beneficial event will come to pass i n the second event (event number 2). For events that are not the first event, (Real Options( model defines the event number N+1 as (if event N has been successful to obtain a desired result, evaluation of the possibility of event N+1 to occur is computed, along with the possible benefit of N+1. If event N has a result that is undesirable, the entire process ends. ( So, instead of seeing the model of future cash flow (or desirable result events), a Real Options model does not have a (useful life( but attempts to predict when the series of events will end and what the accumulated result will be. The Real Options model, however weak (in terms of assumptions or addition to understanding of (useful life(), does solves another conflict in measurement of IA: the conflict between consistency of an entity-specific measurement and the fair-value approach. The key for consistency is that no assumptions are made a-priory to using the model: each step has its own unique scenario and set of assumptions that can be extended and extrapolated by an external user or for internal use[? ][xix]. Because it is a projective model where future benefits are based on some assumptions, it can not be much more conservative than any value model conjured up by managers (or auditors). Consequently, (Real Option(s( place on the Y axis is 85. Proprietary Value Models: Although research abounds with successful examples of special valuation model, the test of consistency is a challenge to these models: (1)consistency of measurement over time (because not enough materials have been collected under any particular model) ; (2)consistency between business units (because the measurements are proprietary and a valuation model that fits an insurance corporation(s will be likely mot fit for a flower-delivery corporation or even an academic institution). And (3)consistency with GAAP: although these measurements are all non-GAAP compliant, by definition of this discussion, they do not rely on GAAP in their assumption. These models often use non-financial reporting assumptions that puts them closer to cost accounting than to financial accounting. For example, banks and lending institutions use proprietary value models to assess credit worthiness of certain IA-laden companies[? ][xx], although these valuations are typically limited to IA such as patents or copyrights because they have leverage in marketable or contractual terms[? ][xxi]. Simply indicating to the user ( external or internal ( that certain valuation is (estimated( or (based on a model( without specifying the assumptions, can lead rendering the valuation an act of providing useless or mis-stated financial value. An abstract standard setting is required to fulfill the task of measuring IA. Attribution of Income: IA can be attributed and recognized by measuring normalized operating income and subtracting the portion of income attributable to other classes of assets. This is a generalized value model that is based on fewer assumptions. It, too, can be located at Y=100. Discussion of examining the range of measurements available for Intangible Assets: On the axis of measurement (Y in this paper), some possible points can be plotted: first, measuring cost is the GAAP derived method (Y=0). For example, historic cost of training, benefits and other outlays of resources can be aggregated to measuring the intangible value of Human Capital, as an asset. Of course, whether such measurement can be recognized or reported must be construed on the respective X and Z axis, as presented elsewhere herein. The historic cost measurement will be on the 0 point of the Y axis (Measurement). In contrast, at the maximum point on the Y axis (Y=100), we plot the concept that allows any proprietary value model. Whether it is acceptable as consistent (read: GAAP compliant) or not, value models are available for managers and users of financial information on any IA-based event. Data mining and computer-oriented accounting information system make creating such models a relatively easy task, albeit a proprietary tool for the reporting entity or industry. Appraisals were often hailed as the magic bullet for such metric setting and some might set that to be the magic (Y=50( on the Y axis. But, as shown earlier in this presentation, appraisals are simply value models that have been warranted or certified and are founded on their own (multiple) assumptions. Because applying the right mix of different appraisals methods, human judgement and experience causes variation in the consistency of this valuation[? ][xxii], appraisals can not be a consistent or reliable method of measuring IA. Thus, appraising an IA receives a mark of 90 on the Y axis. As alternative of future benefit inflow models, a (real-options( model is also available to some small relief of the issues. Real Options, too is set at Y=90. Recognition of Intangible Assets Recognition of Intangible Assets There exists a notion that recognizing IA is a threat to proper disclosure of current period expenditures: capitalization of certain outlays can be seen as a scheme for expense deferral, designed to enhance the perceived value to creditors (shareholders et al). Proper classification, processing and reporting structures designed to deter such improper reporting can be effective. Overall, requiring additional disclosure can only enhance the utility of the financial report to its users. On the other hand, it is easy to prove logically (see Appendix) that IA should be recognized, assuming that it can be properly and consistently measured. The argument for capitalization essentially shows that if one assumes that (1) A company must have a growth factor ((gamma() in its assets in order to survive; (2) Outlays of assets (cash) in period N reduces Equity in period N; (3) If (gamma( is present then recognizing outlays as expenses in period N understates Equity in period N; Therefore, the recognition of expenses is inaccurate, and the capitalization of these outlays is required. In this paper, the X axis will become the range of possible recognition treatments of IA. In general, several points of view are identifiable on this axis. Currently, GAAP does not allow for recognition of IA (except Goodwill from purchase transaction) either because of the control test[? ][xxiii] or because of the measurability test (measurability pertains to the Y axis in this model). An opposing view is presented states in essence that IA are either any excess of market value over book value, or that earned income, before depreciation, amortization, and taxes (or some other similar representation of operating income) can be allocated([? ][xxiv] to the different asset classes: fixed, financial and intangible. Finally, using a completely projectionist method future cash flow as the value of an IA (perhaps in conjunction to subtracting the adjusted-basis and adding the disposal value) might allow non-GAAP recognition of an such an IA. GAAP Recognition: Currently GAAP contains no reco gnition of IA, other than Goodwill as provided by GAAP. As discussed in the measurement section, above, Goodwill is recognized only under certain purchases where certain tests of the excess of FV over AB are present, giving rise to Goodwill. However, Goodwill is often realized and recognized when another class of IA should be created, instead. Goodwill is realized and recognized due to an excess of a purchase consideration over FV (GAAP). This excess, however can be disaggregated or classified more finely than simply calling it Goodwill: Take for example a hypothetical acquisition of a Value Added Network (VAN) provider by an Internet Service Provider (ISP). The former provides the communication tools, the phone lines and the data traffic from customer(s homes to the Internet. The latter, the Internet Service Provider, can benefit from this acquisition by avoiding renting the VAN(s and instead capitalizing on the acquisition(s future cash in flows. Moreover, the ISP can direct its customer base to use VAN as a preferred channel, creating certain loyalties, flexibility (for the customers) and other added value benefits. Assuming – under GAAP – that the ISP paid the VAN(s shareholders more than the FV of their stock, an entry for Goodwill is required. However, this entry is a misnomer: the Goodwill is not really for the excess value but for the additional structure capital (SC) of the acquiring entity. Mostly, the VAN(s organizational structure can benefit from this excess (only in secondary order is the future cash inflows of the acquired VAN to the ISP. ) Because Goodwill is the only GAAP compliant IA combined with its possible vagueness or generality, it receives a position of 0 on the X axis. Recognizing only Marketable IA: This method allows for some latitude in recognizing certain IA, for example, patents, copyrights, and contractual leverage (with employees, suppliers or customers). Using this method excludes most internally generated IA because their effect is not legally binding. Recognizing IA based on their enforcability and to some degree, marketability gets placed at X=50. Recognizing All Events: Some knowledge based essays argue that all events in a business entity is one of IA. As such, all otherwise not measured events can be considered intangible and once measured, recognized on the entity(s books. Because it is the most relaxed method, recognizing all non-financial events in an index or model of fair value[? ][xxv] obtains X=100. Recapitulate: Valuation Recognition Valuation and Recognition of IA has yielded a two dimensional plain on which different methods are available. At the most conservative level, GAAP driven, is the point (X=0,Y=0) which asserts that measuring asset must be according to the past-event principle (historic cost) and that with the exception of Goodwill, no internally or externally generated IA are accounted for. Departing from this basis, on the valuation scale (the Y axis) are proposed method of measuring the value of IA ((future cash flow(, (appraisal( or (real-option( models) make an interesting combination. For example, assume the point (X=0,Y=100) on the X,Y plain is proposed and accepted. This means that a only historic cost (X=0) is realized and yet, that future cash flow (Y=100) is used for measuring the value of these asset. Thus, any hybrid of such a nature (cell D in the Table I) of conventional measurement and unconventional recognition poses the challenge to the third axis in this paper: presentation of IA.    |   |   |   | |   |Recognition: X=0   |X=50 |X=100 | |   |   |   |   | |Valuation |(A) |(B) |(C) | |Y=0 |( IA not recognized[? [2] |( Select IA recognized, based on |( All events recognized, if not | |   |( Historic Cost |market, contractual. |classified elsewhere they are IA | | |   |( Historic Cost |events | | | |( Historic Cost | |   |   |   |   | |Y=85 |(D) |(E) |(F) | | |( IA not recognized |( Select IA recognized, based on |( All events recognized, if not | | |( Real option valuation model |market, contractual. classified elsewhere they are IA | | | |( Real option valuation model |events | | | | |( Real option valuation model | |   |   |   |   | |Y=90 |(G) |(H) |(I) | | |( IA not recognized |( Select IA recognized, based on |( All events recognized, if not | | |( Appraisal (cost, market, income |market, contractual. classified elsewhere they are IA | | |approaches) |( Appraisal (cost, market, income |events | | | |approaches) |( Appraisal (cost, market, income | | | | |approaches) | |   |   |   |   | |Y=100 |(J) |(K) |(L) | | |( IA not recognized |( Select IA recognized, based on |( All events recognized, if not | | |( Proprietary Value Model |market, contractual. |classified elsewhere they are IA | | | |( Proprietary Value Model |events | | | | |( Proprietary Value Model | Table I: Intersection o f measurement and recognition approaches for IA[? ][3] Presentation of Intangible Assets The issue of possible presentation of IA as part of a financial statement must be addressed by the Reporting utilization that such a report contains. Not specifically within the scope of GAAP(s IA (other than Goodwill) are vaguely disclosed in the financial statement. As research shows, some Securities and Exchange Commission regulated corporations disclose Goodwill in aggregated format, while others disclose the underlying detail. Moreover, the other (disclosure( of IA, specifically to the external user, is done by the Management Discussion and Analysis (MDA) that accompanies most financial statements of publicly held entities. However, MDA is a really only another form of appraisal, and not unbiased at that, in relation to IA valuation. In reference to accounting for IA, MDA is inapplicable as interpretation of the value, structure and other forms of unclassified (and unaudited) material statement can become vague in its message to external users. It is important to note that the internal users of a financial statement are slightly better equipped to properly ascertain the message in the financial report; internal accounting practices, cost management and non-financial reporting facilities can aid an internal user to better gauge the weight and context of an IA reference within the financial statement, be it a Goodwill or otherwise disclosed IA. The current GAAP disclosure practice (but not requirement) is at the lower end of the Z axis (Z=0). Under GAAP, a balance sheet of a corporation that might have intangible resources at its disposal might be presented in the following way (example 1): |   | |Balance Sheet, GAAP Driven | |   | |Assets $1000 | |   | |Liabilities (100) | | | |Equity (900) | Example 1: GAAP Driven Balance Sheet Complete inclusion of any intangible resource available to a company is in contrast to the current GAAP treatment. A complete inclusion of non-required disclosure of IA is at the farthest end of the Z axis the concept of full integration of IA in the financial reporting (Z=100) . Of course, this in itself is a valid notion because full disclosure of IA represents expressing mostly relevant information to the user of the financial report. [? ][4] Relevance however, has a trade off with accuracy. The relevance of including any and all IA in a financial statement might hinder on its accuracy; the example below makes this point. Full integration of IA in a financial report can lead to a balance sheet of the following format (example 2):    | |With Considering IA, Complete Inclusion | |   | |Assets $1500 | |(capture events related to both tangible and intangible resources) | |   | |Liabilities (100) | |   | |Equity (1500) | Example 2: Complete Inclusion driven Balance Sheet A possible over-statement of Assets by $500 exists under a complete inclusion method, which is most permissive in relation to GAAP. This type of presentation contains all resource-based events pertaining to the business at hand. It includes both financial and non-financial events pertaining to the entity. Some of this superset(s contents are IA that are externally or internally generated. For example, employee loyalty or positive media coverage are non financial events that affect its financial position. A possible reconciliation between the requirements to present certain financial statement elements (such as fixed assets, financial assets, current and non current liabilities, shareholders( capital et cetera) can be obtained in a tiered financial report. The concept behind a tiered financial report is that the core of any financial report must be GAAP driven. Its benefit to any user must continue in order to provide consistent, accurate and standardized language of communication of a financial position. Within this core, GAAP reporting is one where the balance sheet presents the assets and the claims against them. This fundament is in turn included in a larger set which can include not only cost-related assets but value driven assets, i. e. IA. Conceptually, IA that provide a growth factor (recall: gamma 1) is meaningful to the financial position of the reporting entity. For example, suppose an internally generated IA such as organizational structure or shared knowledge exist (assuming it can be valued and recognized). Under GAAP IA are not attributed to growth of several periods (by definition, growth is the increase of the value of an asset between successive periods). However, for the users of the financial statement, the information about such growth is important in making educated decision about the going concern and prospects of the entity. Thus, the compromise format of financially reportable events includes a degree of IA-related events that can affect a reasonable user(s decision-making process. This type of reporting mechanism is about mid-way between GAAP and Non-GAAP reporting format, at Z=50. An example of a tiered balance sheet follows (example 3): |   |   | |Without Considering IA |With Considering IA, Tiered Format | |   |   | |N/A |Intangible Asset $300 | | |(Note: Recognize IA events based on historical ost) | |   |   | |Assets $1000 |Assets 1000 | |   |   | |Liabilities (100) |Liabilities (100) | |   |   | |Equity (900) |Equity (900) | |   |   | |N/A |Equity Attributed to Intangible Asset | | |(300) | Example 3: (Padded( Balance Sheet In essence, this type of (padding( of a balance sheet is derived from the set concept introduced above. The (core( statement, consisting only of Asset, Liabilities and Equity, remains intact. An extended set of financial events allow further disclosure of the financial effect of IA (in this example, by using the most aggressive GAAP-departure valuation method). Recapitulate: Recognition and DisclosureRecapitulate Recognition and Disclosure Just as Valuation and Recognition can be plotted on a two dimensional plain, so can the axis of Recognition and Disclosure. Overall, the X,Y and Z axis allow us to examine the problem at hand on a three-dimensional basis. The intersection point of the Recognition alternatives in relation to the Disclosure alternatives follows: |   |   |   |   | |   |Recognition |   |   | | |X=0 |X=50 |X=100 | |   |   |   |   | |Disclosure |(M) |(N) |(O) | |Z=0 |( IA not recognized |( Select IA recognized, based on |( All events recognized, if not | |   |( No GAAP required Disclosure, |market, contractual. classified elsewhere they are IA events | | |only discretionary MDA |( No GAAP required Disclosure, only |( No GAAP required Disclosure, only | | |   |discretionary MDA. |discretionary MDA | |   |   |   |   | |Z=50 |(P) |(Q) |(R) | | |( IA not recognized |( Select IA recognized, based on |( All events recognized, if not | | |( Tired ((Padded() Financial |market, contractual. |classified elsewhere they are IA events | | |Report |( Tired ((Padded() Financial Report. ( Tired ((Padded() Financial Report | |   |   |   |   | |Z=100 |(S) |(T) |(U) | | |( IA not recognized |( Select IA recognized, based on |( All events recognized, if not | | |( Full financial incorporation |market, contractual. |classified elsewhere they are IA events | | |of IA – undefined |( Full financial incorporation of IA. |( Full financial incorporation of IA | Table II:Intersection of measurement and reporting approaches for IA. Cells M-U describe the X,Z plain (the letter are assigned sequentially). To complement tables I and II, the intersection of valuation alternatives and disclosure methods available are included in Table III: |   |   |   | | |   |Disclosure |   |   | | |Z=0 |Z=50 |Z=100 | |   |   |   |   | |Valuation |(V) |(W). (A1) | |Y=0 |( No GAAP required Disclosure, |( Tired ((Padded() Financial Report. |( Full financial incorporation of IA | |   |only discretionary MDA |discretionary MDA. |( Historic Cost | | |( Historic Cost |( Historic Cost | | |   |   |   |   | |Y=85 |(A2) |(A3) |(A4) | | |( No GAAP required Disclosure, |( Tired ((Padded() Financial Report. ( Full financial incorporation of IA | | |only discretionary MDA |( Real option valuation model |( Real option valuation model | | |( Real option valuation model | | | |   |   |   |   | |Y=90 |(A5) |(A6) |(A7) | | |( No GAAP required Disclosure, |( Tired ((Padded() Financial Report. ( Full financial incorporation of IA | | |only discretionary MDA |( Appraisal (cost, market , income |( Appraisal (cost, market, income | | |( Appraisal (cost, market, |approaches) |approaches) | | |income approaches) | | | |   |   |   |   | |Y=100 |(A8) |(A9) |(B1) | | |( No GAAP required Disclosure, |( Tired ((Padded() Financial Report. |( Full financial incorporation of IA | | |only discretionary MDA |( Proprietary Value Model |( Proprietary Value Model | | |( Proprietary Value Model | | | Table III:Intersection of measurement and disclosure approaches for IA. DiscussionDiscussion The problem of Intangible Assets revisited Conceptually, the accounting for IA is at the heart of the framework that links the Balance Sheet and the Income Statement: at its core the balance sheet is a statement of resources while the income statement is a an expression of the utilization of these resources (tangible or otherwise available to the entity). Coupled, the traditional balance sheet and income statement includes only tangible resources. However, the traditional Income Statement includes activities that stem from using all available resources. In the asymmetry lies the reason for inclusion of IA resources on the Balance Sheet. For example, outflows for compensation is often the single largest expense of a corporation. Yet, employee knowledge, or other types of Human Capital are rarely disclosed. Further, any activities that are profitable, i. e. where the growth factor ((gamma() is greater than 1, are attributed only the tangible resources. Classes of Intangible Assets IA can be divided to two classes: resources that are within the control of the organization and resources that are only partially within the control of the organization. To maintain a mathematic model, we can introduce OC, Organizational Control, such that: For IA such as Customer Base and Customer Relations Index, Vendors( Credit and Trust, Internal Production or Service Procedures, OC = 1. 0, i. e. there is complete control over the resource, which is an intangible asset; For IA such as Human Skill Level , Employee Satisfaction and public Relation Index ((Public Image(), OC 1. 0. The following is an imaginary – yet possible – comparison of two companies that might have different levels of Organizational Control over their IA, classified according to their business type. Table IV is an illustration of OC levels: |   |   |   | |   |(Tobacco and food conglomerate(|(Northeastern Ice-cream | | | |Manufacturer( | |   |   |   | |Organization Control Level = 1. 0 |   |   | |   |   |   | |Customer Base |1. 0 |1. | |   |   |   | |Vendor(s Credit |1. 0 |1. 0 | |   |   |   | |Internal Production Procedures |1. 0 |1. 0 | |   |   |   | |Organization Control Level 1. |   |   | |   |   |   | |Human Skill |0. 9 |0. 7 | |   |   |   | |Employee Satisfaction |0. 8 |0. 8 | |   |   |   | |Public Image |0. 5 |0. 9 | Table IV:The (determined) values of Organizational Control (OC) over Resources We assume these values derive from internal yet consistent studies and valuation, we can see that for the first three (classified as IA over which the entity has complete control) the OC value remain 1. 0. This simply indicates an existence of an IA (completely within the company(s control). The second group of so called (assets( (or generally: resources) are not completely within the control of their respective entity. We can say, perhaps, that the ice cream factory workers need less training than the tobacco production plant workers but that they are equally satisfied. Further it is clear that the tobacco conglomerate has less leverage in their public image (OC = 0. 5) than the ice-cream maker (OC=0. 9). The important point about all these resources is that the entities are not controlling the value drivers. Therefore, for example, their public images is different and it can not be enlisted as an (asset( because it is outside the scope of their respective control. [? ][5] The three sets of resource group can be summarized as follows: The most inner core of assets that are GAAP driven: Tangible Assets that are at the core of the Income Statement and Balance Sheet pair. These assets produce tangible activities such as cash (inflow) or products (output). The intermediate outer tier consists of resources that are fully under the control of the entity, thus they can be classified as Assets, albeit intangible: they too produce activity such as competitive edge (HC) and customer loyalty (SC). In contrast to HC and SC, the outmost tier class of resources are intangible resources that are not fully under the control of the entity thus fail the control test of the definition of an Asset. In a sense, the inner set of Balance Sheet and Income Statement represent the fundamental analysis that an external or internal user of these statement might be interested in. Under this framework, fundamental ratios and projections are available in the most traditional sense. Extrapolating from that tier, the resources described as (true( Intangible Assets, i. e. hat they are measurable resources that occurred in the past and are within the entity(s full control, describe the effect of growth and going concern. Growth is indicative of innovation or competi tive edge, while going concern is more general and encompasses other factors. In this vein it has been shown that IA are a source of both growth and continuity: IA are key to strategic planning and success[? ][xxvi]. Resources such as reputation, employee know-how, and organizational culture were also linked to success factors of companies[? ][xxvii]. Finally, the outer tier of partially controlled resources can be described ( if so wished by the reporting entity ( as additional disclosure of interest to the user of a financial report. The outer tier is only marginally useful because of the lack of full control the reporting entity might have over factors such as public image. It will be interesting to see if the two outer tiers of resources will play out in future disclosure: the FASB is now encouraging companies to discloses elements of intangible assets in their financial reports. However, from a review of the two tiers it seems that disclosing resources in the intermediate tier can add to the reporting utilization of the entity(s financial report, perhaps if it is presented in a two tier Balance Sheet ((padded(, described earlier). Resources that are not within the complete control of the entity (the outer tier(s elements) will most likely not be disclosed. Assuming a valid and consistent index can be obtained   (by an external review, for example), there can be usefulness to disclosing elements of intangible resources which are (true( IA such as index of customer base, customer loyalty and vendors( credit which reflect on a positive (going concern(. In contrast, disclosure of elements such as employee retention, public image and human skill index, can provide external users a marginal utility regarding the activity and prospects of the entity. Conclusion Measurement of IA is the area where the disparity is widest (on the Y axis in this discussion(s three dimensions model). The alternatives to historic cost are valuations based on proprietary models or based on certified models. Both alternatives are insufficient because they require judgement which lead to substantial variation. Historic cost is most consistent but inapplicable because it can not measure certain IA such as customer base or affiliations and alliances. Therefore, an allocation approach is suitable: computing the ratio of growth in equity to fixed, financial and intangible asset allows measurement of IA at least as a class of resources on the balance sheet statement[? ][xxviii]. Further discussion and research is required in order to properly weigh the specific intangible assets within this class, and thus compute the financial value attributed to it. Generally, the emergence of IA and in general, intangible resources, is unavoidable. The accounting profession should treat this type of financial event within its GAAP guidelines and not attempt to preclude it from recognition. Plainly, accounting for IA by including it in the financial statement (specifically, as part of the Balance Sheet) is not helpful to the external user. Such recognition will simply inflate the value of corporations and will cause comparisons to be more difficult and the financial statement viewed more skeptically. However, by methodically presenting IA in a tiered manner, users of the financial statement can view the traditional fundamental (current) GAAP elements as well as supplementary elements. In a sense, allowing companies to literally (pad( their balance sheet with separate IA and IC (Equity due to IA) will put to a (vote( of the external and internal users the concept of systematic disclosure. To wit, instead of a honorable mention in the MDA section or a buried treasure in the footnotes to the financial statement, disclosing IA on the face of the balance sheet, without reducing its existing utility, might be a solution to the emerging need to report IA as a financial event. References [pic] [pic] [1][1]IA are often labeled knowledge assets. Much has been written about a knowledge economy and some attempted to define all resources as knowledge-based. The device in which this is possible is usually illustrated by an example of an organization that can be described all in terms of knowledge. Such zeal is convincing only to the extent that a counter example is not produced. Knowledge is information produced by data and ideas. Transforming knowledge to a benefit producing resource ((value() converts knowledge to an IA. Thus, in terms of scope of valuation of IA, not all business process are considered IA: only business processes that have not been measured or presented elsewhere can be considered measurable for purposes of this discussion. [2][2]In all the instances of Y=0, IA is not recognized except for Goodwill in purchase. [3][3]The recent FASB sponsored attempt to account for certain types of IA by rules of annual impairment valuation (read: appraisal valuation method) is position in box (B( of Table I: using historic cost and a (certified) appraisal of fair value of an IA to trigger both valuation and recognition. 4][4]However, (strange bedfellows( effect might occur if we simply plot the Z axis against, say the Y axis (measurement): the point (Y=0, Z=100) yields an IA that (is not recognized (Y=0)( and (integrated in the financial report( (Z=100). Therefore, at least from a practical point of view, these type of pairing with GAAP (Y=0 and Z=100) can not be used for our analysis: this point in our exploration model is undefined. [5][5]It is the public, the society in which they operate for example, that determines which company is the (Kind American Corporation( and which is the (Evil American Corporation. ( [i][i]. ABI-Inform is available via the Internet from ProQuest Information and Learning Company. [ii][ii]. Accuracy of the yield and direct capitalization methods: A twenty-year empirical study of the electric utility industry(; Assessment Journal Chicago; Richard R Simonds; Vol. 6; No. 4; pp. 49-55 [iii][iii]. Internet: available: www. dictiornary. com. Source of this citation: 1997 Princeton University. [iv][iv]. Internet: available: www. dictionary. com. Citation source: The American Heritage Dictionary of the English Language, 4th Edition. [v][v]. FASB presentation, Nakamura in 4th Annual Intangible Assets Conference, Ross Institute, New York University, May 2001. [vi][ vi]. Financial Accounting Standards Board; Special Report : Business and Financial Reporting, Challenges from the New Economy; Wayne S. Upton, Jr; No. 219-A; April 2001 p. x (Executive Summery). [vii][vii]. Lynn, Bernadette, CMA; Intellectual Capital Key to Value added Success in the Next Millennium; Society of Management Accountants of Canada, CMA Magazine. Available: Internet http://www. cma-canada. org. [viii][viii]. Lynn, Brenadette. [ix][ix]. Data is the superset of information which in turn is the super set of knowledge. Purposeful and formal conversion of data to information and information to knowledge, creates Intangible Capital, which can be leveraged. [x][x]. Berry, John; MIT, Wharton Search for IT Asset Metric; Internetweek; Manhasset; Feb 5, 2001. [xi][xi]. (†¦ Brand assets and patents are knowledge assets, not just technology(. Companies May Be Unwittingly Ignoring The Bulk of Their Asset Value; Investor Relation Business; New York; Dec. 3, 1999; p. 4. [xii][xii]. Hal Varian; How Much Information is Produced Worldwide? University of Berkeley; Presented in the 4th Intangibles Conference at New York University, Stern School of Business, Ross Institute of Accounting Rese arch; May 2001. [xiii][xiii]. Christopher Tucci; The Value of Collaborations and Alliances; New York University; Presented in the 4th Intangibles Conference at New York University, Stern School of Business, Ross Institute of Accounting Research; May 2001. [xiv][xiv]. FASB; Special Report; Chapter 2. [xv][xv]. John Rutledge, You(re a Fool if You Buy into This One; Available: ABIinfrom. [xvi][xvi]. Alfred M. King, Jay M. Henry; Valuing intangible assets through appraisals; Strategic Finance; Vol. 81, No. 5, Montvale; Nov. 1999. pp. 32-37. [xvii][xvii]. Alfred M. King, Jay M. Henry, Strategic Finance, Nov. 1999. [xviii][xviii]. Lawrence C. Rose; Accuracy of Appraisers and Appraisal Methods of Closely Held Companies; Entrepreneurship Theory and Practice (ETP) Vol. 17, No. 3; Spring 1993; pp. 21. [xix][xix]. FASB; Special Report; p. 39 [xx][xx]. Alfred M. King, Jay M. Henry, Strategic Finance, Nov. 1999. [xxi][xxi]. Wiley A. Scott, Jr. ; Borrowers( Intangibles May be Off-Balance-Sheet Gold; Commercial Lending Review Vol. 9, No. 3; Boston; Summer 1994, pp. 26. [xxii][xxii]. Lawrence C. Rose; Accuracy of Appraisers and Appraisal Methods of Closely Held Companies; Entrepreneurship Theory and Practice (ETP) Vol. 17, No. 3; Spring 1993; pp. 21. [xxiii][xxiii]. FASB; Special Report; Chapter 4. [xxiv][xxiv]. Lev, Baruch. [xxv][xxv]. IAS 36 defines (value in use( as (future cash flows expected to arise from the continuing use of an asset. [xxvi][xxvi]. Joseph A. Patrick et al; Global Leadership Skill and How to cite Accounting Treatment of Intangible Assets, Papers

The Main Issues of Jack

Questions: 1. Identify the main issues that Jack needs to consider and provide evidence from the case study to support your answer. 2.Explain how Jack would benefit from applying the rational decision-making process to address the issues identified in Question One. 3. Describe the different resources (e.g. valuable, rare etc.) that are available to Jack and provide evidence from the case study to support your answer. 4.Identify, explain and apply one of the organizational strategy frameworks that Jack might find helpful as he considers the future of Glasshouse Avocados? Answers: (1). Solution: Jack followed the business sense of his father and business numbers were doing pretty well. With the passage of time, Jack sensed that there are number of factors in the external environment which can turn threat in the time ahead. Considering the case study, main issues that Jack need to pay attention are: Cost of Production-Production costs are the expenses that are incurred to get the finished products. A company that knows how much it will cost to produce an item, or produce a service, will have a clearer picture of how to better price the item or service and what will be the total cost to the company. Here the product is avocado and production cost includes cost of irrigation equipment and managing root rot in the plants. It is a general fact that profits are always lower when cost of production is higher and business cannot sell products at very higher price in order to cover the rising cost of production. In growing avocados, there are several others cost involved as well such as planting, pruning, pest management, fertilization, labor and harvesting. There could invisible cost as well such as interest on capital. (Capital taken to invest in business). (Investopedia) Increasing competition- Competition refers to active demand by two or more organisms for the resources which are rare or are in shortage. (merriam-webster).Earlier Jack enjoyed the higher profits in the business as there was not much competition and with his networking skills, he had marketed his business so well following his fathers footsteps. Earlier there were low number of growers and cost of overhead and transport cost was shared among them. With more and more growers in the same line of business and with no more cost sharing concepts, results were not favorable with downward sloping gains and slipping business. Lower Sales- Lack of process is considered as one of the strong reasons of low sales and sales manager is handicapped if process is missed. (Eyesonsales)Two of the crucial things discussed above are the backbone of the business to achieve higher sales .Here in case of Glasshouse Avocados, the cost of production and competition was cut-throat which resulted in sales number down each year. In 2012, sales number were down by 13%, trend continued further 15% sales down in 2013 as compared to sales of 2012 but in 2014, there was slight rise in the sales by 9%. With sales almost down, profits dipped and slowdown definitely tensed the situation for Jacks business. Product Innovation Impact-When new growers stepped in the business, they too had mighty understanding of facts above so new entrants came up with idea of putting avocado in a tube and this helped them to emerge as better performers. They were earning profits in spite of stiff competition and uncertainties. Natural Conditions- Clean water and clean air forms the part of natural environment and have impacts on the business functions. (Small business) With a growing time almost a year, there is less chance of having farms vacant to grow anything in short run. With longer growing season, weather conditions need to be in alignment with plant growth which is not possible all over the year. Variations in climate affect the growth cycle and quantity produced. Moving from streamlined business to exploring options- There is change in the air.(The Hindu business line) With Glasshouse Avocados in troubled times with all discussed reasons, Jack is considering moving to other options such as real state but this move by Jack is in double minds. He doesnt want to move but seems nothing else is working. (2). Solution: Business decisions are high risk decisions because the outcome of the decision have impact on several spheres of the business. Rational word simply mean to be logical. Rational decision making process refers to multi-step and formal process of analyzing various options available and choosing the best alternative by applying logic and objectivity. The model of rational decision making can be useful for to manage the issues and reach out to possible solutions. Rational decision making if applied well in current scenarios of Jacks business could result to bring him back in activity and profit numbers may expect positive change. (Happy manager) Steps involved in rational decision making in respect to case study: Define Problem- Lower sales profits Goals of the business-To grow revenue and beat the competition Developing alternative solutions-Concentration on custard apple and passion fruit. Evaluation- Compare cost of production, time period and revenue estimates Selection of best solution- Choose the best to achieve the target. Detail description and analysis of the various steps involved in rational decision making process in context with case: Define the problem- In the first part it is well explained the issues faced by Glasshouse Avocados. Lower sales, dipping revenue and competition creating downstream atmosphere are the major issues troubling Glasshouse in present times. The core reason of dipping profits are the dipping sales and sales are down because of the advanced and modern competitors who gained edge over Glasshouse Avocados. Intuitiveandrationaldecision making are the two ways that an individual can approach problem solving. (Study, Ch.-9) Goals of the business The primary goal of any business is to create economic value i.e. maximize profits. Glasshouse Avocados aims to regain its market share by growing its lost sales. The milestone is also to gain long term stability in terms of production and sales.(Boundless) Developing alternative solutions- Since two of the fruits custard apple and passion fruit are the good lead to grow sales because other competitors have their attentions only on avocados. This opportunity can also be utilized to divert other growers attention and avocados could also be taken in consideration. Elias being a marketing expert have few better ideas that deserves attention. His ideas to integrate processing facilities and develop new supply chain initiatives are worth risk taking. By innovative and attractive packaging of tube avocados, Glasshouse can offer quality and substitute products in supermarkets. Further local growers can also be brought in partnership and business could be expanded. Evaluation-Elias idea have more weightage in terms of success rate. Yes, it involves investment but keeping long profits and sales would too matter. Custard apple and passion fruit could be secondary option as Jack considers avocados to be in plenty numbers and yield good profits. Jack have hopes to revive his business and Elias idea somewhere outshines the other in various criterias such as cost involved, estimated earnings and so on. On contrary, if Jack applies idea of custard apple or passion fruit, others growers may start selling identical products and there may again arise situations as currently prevailing. Evaluation is brief terms is the systematic assessment of the merit of something. (Social research) Selection of the best alternative-Number of ideas are evaluated on various parameters and the best idea is chosen which have pros and can help to revive the business out of the downtime period. In the real world we tend to choose solutions that are reasonable or acceptable instead of the optimal one. So it's important to keep these steps in mind when making hard decisions. (LinkedIn) (3). Solution.-Resources can be in the form of tangible resources or human intelligence or environmental factors. Fixed asset are the valuable resources of any organization. Resource can be a stock or supply of money or staff that can be drawn by organization to function effectively. Jack have access to number of resources that could actually turn out to be profitable assets of the business. The land area of 8o hectares is valuable resource to Jack and this could also be utilized in current business of avocados and other utility is that he have real estate option open to go ahead with constructions of residential or office space to sell or lease out. It will give access to funds in abundance. (Business dictionary) Jacks daughter and son possess good business acumen and they understand the current ups and downs of the business very sensibly .The way Jacks daughter Jacqui look at all the factors , their alternatives , cost reduction and decision making skill is very valuable to Jacks business. His son Elias is very creative and have ideas of expanding business in the same products or diversify the product line. Jack being very successful in his venture holds finest reputation and aware of local zones can easily set up his hands in new ventures as well. Goodwill of the Glasshouse avocados is asset for Jack and its good time to reap up the fruits. (4). Solution: In providing solution to the above questions, there has been already good use of strategic model of SWOT analysis where we have discussed and analyzed the strength and weakness of Glasshouse Avocados and also available opportunities and threats. Strong belief is that to have shining future of business, Jack could make the best use of The McKinsey 7-S Framework. This model approaches both internal and external factors and can be used in wide variety of situations. Mckinseys 7 elements are classified into Hard elements and Soft elements. (MindTools) Hard elements are easy to recognize and management have direct influence on them. Soft elements are affected by culture of the organization and perhaps are tough to be identified early. We will look at each element and co-relate it to fit in Jacks business venture. Strategy- It means to have competitive edge over your competitors by selling goods or services that are unique in some or the other way. Glasshouse avocados have ideas to expand business line by selling tube avocados and enabling customers to eat avocados more effectively. (MindTools) Structure- It defines the reporting relationship in the organizations. (MindTools) Glasshouse avocados have plans to add on growers of avocados with them to reduce the overhead costs of small growers and reporting needs to be clear when working professionals grow in numbers. Systems-It defines the processes followed from start till finalization of the product. (MindTools) Glasshouse avocados have set processes and putting them in order with intellectual workers will help in cost saving and thus, profit will increase. Shared Values- It refers to work culture of the organizations and ethics it believes in. (MindTools) From the Errors time, work ethics remained strong and this definitely serves value in the organization. Style- style of leadership in the organization. Glasshouse avocados should have Laissez Faire style of leadership to deal with market conditions. (MindTools) Staff-the human workforce. Glasshouse avocados needs to hire more people if they are with the plan of expanding their business line. People hired must be capable to handle ups and downs of the business and manage the client base. (MindTools) Skill- As marked above, competency of the employees is crucial for the success of the organizations. At Glasshouse avocados, management starting from Errol to his grandson and daughter have tremendous strength to grow their business and hire skilled people to lead Glasshouse avocados. References: Production cost. (n.d). In Investopedia. Retrieved June 1, 2016, Rational decision making model. (n.d.).In Happy-manager. Retrieved June 1, 2016, The Rational Decision Making Model: Steps and Purpose in Organizations. (n.d). In Study. Retrieved June 1, 2016, 6 Steps in the Rational Decision-Making Model. (2015, Sept.10). In Linkedin. Retrieved June 1, 2016, The McKinsey 7-S Framework. (n.d). In Retrieved June 1, 2016, (n.d).In Business dictionary. Retrieved June 1, 2016.