intellectual capital

A complex concept that includes human knowledge, information systems, brand names, and reputation. One popular definition is given by the equation:

intellectual capital = human capital + structural capital + relationship capital Here human capital includes knowledge, competences, and the experience and expertise of staff, structural capital includes information systems and databases, and relationship (or customer) capital includes customer relationships, brands, and trademarks. In accounting, intellectual capital is often treated as being synonymous with intangible assets and valued in the same way, that is, by calculating the difference between the market value of a company and its book value Measuring the intellectual capital is important if one is buying or selling a company or comparing the performance of one company with another. In some companies the book value is only a small percentage of the market value. For example, in 2002 Microsoft had a market capitalization of $250 billion with tangible assets valued at less than $70 billion. The intellectual capital of Microsoft was therefore valued at over $180 billion. Clearly, the balance sheet for Microsoft is not reporting the all-important intellectual capital of the company, which includes technology, patents, brands, and human knowledge.