SEC to Encourage Companies to Report Certain Intangibles
A task force appointed by the Securities and Exchange Commission is urging the SEC to encourage companies to value intangible assets such as brand names, customer lists, trademarks, and patents, and include information about such assets in financial statements. The task force was assembled at the request of Arthur Levitt, former chairman of the SEC.
Although such reporting is not a requirement, the SEC is taking the position that investors need to know more about these types of assets in order to make informed decisions.
"The kind of information that is needed is not provided by the traditional accounting methods," said Jeffrey E. Garten, dean of the Yale School of Management, in an interview with The New York Times. Mr. Garten is the chairman of the task force that is looking into this matter.
Suggestions for disclosure of the value of intangibles include providing estimates on the lifetime value of a customer, disclosing how large a part of revenue comes from products introduced within the last year, providing information on the size of the available market for products, and describing the competitive strengths and weaknesses of the company.
The task force indicated its desire that, if such reporting is well-received, some standardization among the various industries would be a necessity. The task force hopes that, in lieu of requiring reporting of previously-unreported intangible assets, competitive pressures would force companies to disclose such information.