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Big Data Needs to Prove Itself
We at the Financial Executives Research Foundation (FERF) appreciate how companies around the world are dealing with Big Data. In most companies, Big Data was of high importance, and investment in it was broadly expected to increase over time. However, in the FERF/Gartner study Financial Executives International CFO Technology, we found that the key IT issue for CFOs was the business value of the investment, and not its technical elements. Importantly most CFOs apparently need convincing about the intrinsic value of IT. A surprising 92% of CFOs believe the IT does not provide transformational/differentiation value.
Bill Sinnett
Senior Director, Research
Financial Executives Research Foundation (FERF)
Some quick lessons from a Data (RE)valuation specialty business (DISCLAIMER: we are data engineers from Silicon Valley, not accountants, but had to learn the hard way. Don't take our regulatory advice, seek your own in your jurisdiction(s), but we can measure the value with precision using our bots VERY quickly)..
Read on...
1. DON'T ASK AN ACCOUNTANT - global standards on INTANGIBLE accounting relative to data are NOT consistent. (if you want to land Data as an Intangible Asset)... IAS38 not allowed, AASB138 allowed, etc etc... Accountants can't agree. We have had to learn more than them on this. The Accounting industry is in disaray when it comes to DATA. Go figure.
2.ASSET IMPAIRMENT - it occurred to us and our clients that IAS36 requires that the CARRY VALUE of intangible data assets be calculated (consistently) every year that the asset exists. ClearDQ was build in 2012, and has done exactly that for listed and unlisted companies year-on-year, very successfully, and getting smarter with each iteration. Source code, Method and Algorithms to be Open Sourced in 2018, stay tuned for the global defacto standard on INTANGIBLE DATA ASSET IMPAIRMENT (all countries, all industries) in the absence of any other cogent attempt at a standard.
3. INTERNALLY GENERATED ASSETS - Also, we have learned that internally generated data assets can be problematic, but a sale/purchase/leaseback/ licensing event creates the right to recognize data assets on the balance sheet, regardless of the "internally generated" status, due to the "monetizing recognition event"... if you buy INTANGIBLE DATA ASSETS yes you can recognize them, but if you build them internally you need to be creating to "recognize" them... Get creative.
4. We have learnt that boards don't like to add NEW Intangible Data Assets the balance sheet for the FIRST time, without a lot of due diligence and risk review.
5. INTANGIBLE SUB-CLASSES and CLOAKING DATA ASSETS - Finally for decades Silicon Valley has been subordinating acquired data assets inside IAS38 and using very clever INTANGIBLE language like "Customer Relationship" as line items in the INTANGIBLES annotation. Take a read of any notable data intensive SEC filing (like Google/Alphabet, etc)... you can find the data assets if you know what you are looking for. The 4 x Intangible asset sub-classes are Emotional, Time, Relationship and Knowledge assets. Data typically sits in Relationship or Knowledge sub-classes. Data can support all 4 sub-classes (value creation) as well as tangible assets too. Clever accounting.
My brain hurts. Back to coding.