Valuation of Information Assets

Information is an important asset for organisations. The concepts of intellectual capital and knowledge management have focused managers' attention on how organisations can exploit information assets for commercial gain. Yet, without acceptance of the need for or means of evaluation of information assets, it is difficult to highlight the benefits of such concepts in commercial terms. This paper deals with some of the conceptual issues relating to this issue. The term 'information assets' can be defined as data that is or should be documented, and which has value or potential value. Information is often seen as a raw material and knowledge is an end result achieved through learning. However, knowledge is also raw material, and information an end result through formalisation. Among the identifying attributes of information one can include expandable, compressible, substitutable, easily transportable, diffusable and shareable. These attributes are manifest in organisational activities such as monitoring how processes are performed, integrating different business processes, customising products and services, and creating information products as the primary output of a business. It is evident, therefore, that the scope of information assets within organisations can be extremely far reaching. The accounting concept of assets does not easily accommodate information assets. Since information cannot be readily measured in monetary terms, and since cost is not a measure of value, there is the problem of how the value of information assets might be ascertained. Approaching this issue requires a consideration of the two main reasons for valuing information assets. The first is for financial reporting purposes whilst the second is to encourage the better management of information assets. With regard to the former, there are two potential paths which financial reporting may take in the future which may accommodate information assets. The first is for a major review of accounting practice to include intellectual capital, and the second involves reporting information assets which may impact on the performance of a company as an additional commentary in a company's annual Operating and Financial Review. With regard to the latter, a possible approach might be to value information in the light of its contribution to making improved decisions, although this has both conceptual and measurement problems associated with it.