The End of Accounting and the Path Forward for Investors and Managers by Baruch Lev & Feng Gu

Author:Baruch Lev & Feng Gu [Lev, Baruch & Gu, Feng]
Language: eng
Format: epub
ISBN: 9781119191087
Publisher: Wiley
Published: 2016-06-27T00:00:00+00:00

Enterprises owning and operating efficiently such strategic assets are able to consistently implement value-creating strategies that their present or potential competitors cannot put into effect and thereby gain a sustained competitive advantage.3 End of theory.

Strategic Resources

The focus of the economic theory of the firm, particularly the offshoot known as resource-based theory, is thus on the strategic resources of the enterprise, like patents, brands, landing rights, extractive properties, loyal customers, or unique business processes—such as Netflix's customer recommendation algorithms—that create sustainable competitive advantage.4 Ironically, most of those strategic resources are not reported by the accounting system, since the investments made to create the resources are immediately expensed, such that financial reports don't provide any useful information about them.5 This, then, leads to the first desirable attribute of our proposed information system—the Strategic Resources & Consequences Report—intended to provide investors' needs:

Usefulness attribute no. 1: Inform investors about the strategic resources (assets) of the enterprise, their characteristics, value, and related attributes (such as number of patents in the company's portfolio, patents supporting products/services, number of patents licensed out, patent quality, protection mechanisms against infringement, etc.).6

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