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Issue 30. Broadening the fixed asset boundary to include other intellectual property assets

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Description of the issue
The fixed asset boundary of the SNA has been expanded to include the output of research and experimental development (R&D) that meets the general definition of an asset. It is evident that R&D captures part, but not all, of the innovation process. It may exclude many expenditures by the production and engineering departments of an enterprise. These same departments may also be responsible for identifying a potential new product and referring it to the R&D department to develop the science behind it. In addition, an enterprise may incur other expenditures before a new product goes to market. These include market research to determine the demand for a new product and marketing expenditures to promote it.

Marketing assets
Marketing assets include brand names, mastheads, trademarks, logos and domain names. Marketing is a key driver of brand value and big corporations invest heavily in building and supporting their brands by advertising, sponsorship and other measures to build a positive image with customers. The SNA treats marketing assets as being non-produced and the expenditures incurred in their creation as intermediate consumption. They appear in the balance sheet only when they are sold. The major reason for not treating marketing assets as fixed assets is due to the difficulty of measuring their value.

Human capital
Apart from any staff training required in bringing a new product to market, innovation expenditures are disembodied from the people undertaking the innovation. Therefore they exclude to a large extent the “investment in human capital”.

Human input is the major input in most production processes, and the value of that input is to a large extent dependent on the knowledge that humans bring to the production process. It is well recognized that an educated population is vital to economic well-being in most countries. Despite the fact that there are major conceptual and practical problems with identifying the value of an educated labour force, there are repeated requests to address this issue within the SNA framework.
Discussions on the issue
The issue still needs to be addressed.

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