Tuesday 6 July 2010

Taking accountants to task

"Accounting for IP?" is the title of an article in the current issue of the Journal of Intellectual Property Law & Practice (JIPLP) by Dr Roya Ghafele (University of Oxford). Roya takes a provocative view of the role played by the discipline and culture of accounting within the world of intellectual property. The abstract of her article gives a clue as to her line of thought:
"Legal context: Accounting constitutes a very specific form of language. Unlike literature or political language, the language of accounting is highly standardized, mathematical in nature and seeks to uniformly and systematically describe events while avoiding expressions of individual creativity or explicit political positions. It is a highly formalized vernacular that documents past performance rather than expectations of the future, preferring the past tense over the future tense. It is a utilitarian language, only employed to achieve specific purposes and document certain contexts. Accounting does not just simply map business, or objectively mirror an existing, pre-defined business context; rather it creates that business context by offering a complex system of representation. In this sense accounting is a social, cultural and historical artifact rather than a natural or technical phenomenon and it can therefore be viewed as the decisive instrument to create and maintain imagined business communities.
Key points: On the balance sheet IP experiences a specific form of authorization. Life is brought to IP by providing a system of stable semiotic orders and discursive selectivity that serve a specific reproduction of complex socio-economic orders. IP is represented in the discourse of accounting by ‘intangibles’, an imprecise term associated with the increasingly observed ‘gap between the market and book value’. For a discourse analyst the phrase ‘closing the gap between the market and the book value’ in and by itself reveals that current accounting systems are to a large extent determined by a tangible assets’ based perspective and offer little scope to document how IP relates to business performance.

Practical significance: Accounting may thus be seen as a gatekeeper of the status quo that poses significant challenges for IP-rich companies, which are confronted with the challenge to either communicate around the lingua franca of accounting or accept that under current accounting statements they cannot adequately document how IP relates to their business performance".
If you feel uncomfortable about the accounting side of IP and want some intellectual support by way of reinforcement of your visceral feelings, this is just the piece for you. Non-subscribers can buy the right to read this article by clicking here and scrolling down to 'purchase short-term access'.

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