The importance of intangible assets in initial public offerings

This paper follows Beatty and Ritter (1986), who argue that lower uncertainty about the value of an initial public offering (IPO) reduces the 'need' for the underpricing of an IPo. Australian IPOs often identify the existence of intangible assets such as goodwill, licenses, brand names, trademarks, patents and capitalized research and development costs in the prospectus. This paper analyses if IPOs identifying the existence of such intangible assets in the prospectus might reduce uncertainty about their valuation and hence allow a lower underpricing return. While the reporting of intangible assets such as goodwill and license costs in the prospectus are not significant ingredients in the level of underpricing, the identification and valuation of intangible assets such as brand names, trademarks, patents and capitalized research and development costs is significant in reducing the level of underpricing return. Our findings are also consistent with previous studies concluding that both the size of the new issue and the use of an underwriter are important in the level of underpricing return.

Intangible assets and the underpricing of industrial company initial public offerings

This study analyses 262 industrial company initial public offerings (IPOs) in Australia from 1994 to 1999. It finds that the identification and valuation of brand name, trademark, patent and capitalized research and development cost intangible assets in the prospectus significantly reduces underpricing. The identification of goodwill and license cost intangibles does not appear to be significant to underpricing. This paper supports the Beatty and Ritter (1986) argument that IPOs may display financial and nonfinancial characteristics that lower the uncertainty about the value of the lPO and hence lower the underpricing of that IPO. Our findings suggest implications for the issuer who wants to maximize the value of the firm at the time of the lPO, the underwriter who is required to guarantee the success of the capital raising and for the initial investors who are looking to reduce their uncertainty about the valuation of the lPO.

Council amalgamations and restructuring in Victoria: how did we value the assets and liabilities?

This study aimed to identify and critically analyse the methodologies and accounting treatments adopted in the transfer of assets, liabilities, revenues and expenses resultingfrom municipal boundary changes associated with municipal restructuring (amalgamations) in Victoria during the early 1990s. In involved the collection and use of oral evidence obtained from officers of a sample of entities engaged in the process and focused on identifying and examining the methodologies used by municipalities. It has also been shown that local government is different from the commercial domain and the accounting profession has not adequately addressed some of these differences.

Accounting for local government boundary changes in South Australia : valuing assets and liabilities or valuing revenue streams

This paper examines the methodologies adopted in the transfer of assets, liabilities, revenues and expenses resulting from boundary changes associated with municipal amalgamations in South Australia during the late 1990s. It investigates the methods employed for apportioning these financial elements, valuations used and financial settlements required. Significant transfers occurred in only three cases. In two cases, councils used simple, pragmatic methods to apportion assets and liabilities, similar to those used previously in Victoria. In the third case a transfer price was calculated based on the net present value of revenues. This method is quite different from previous methods examined and is appropriate where one council will make significant future gains at another council's loss because of net revenue transfers.

Decomposing Consumer Wealth Effects: Evidence on the Role of Real Estate Assets Following the Wealth Cycle of 1990-2002

During the period of 1990-2002 US households experienced a dramatic wealth cycle, induced by a 369% appreciation in the value of real per capita liquid stock market assets followed by a 55% decline. However, consumer spending in real terms continued to rise throughout this period. Using data from 1990-2005, traditional life-cycle approaches to estimating macroeconomic wealth effects confront two puzzles: (i) econometric evidence of a stable cointegrating relationship among consumption, income, and wealth is weak at best; and (ii) life-cycle models that rely on aggregate measures of wealth cannot explain why consumption did not collapse when the value of stock market assets declined so dramatically. We address both puzzles by decomposing wealth according to the liquidity of household assets. We find that the significant appreciation in the value of real estate assets that occurred after the peak of the wealth cycle helped sustain consumer spending from 2001 to 2005.

Book review : Managing government property assets by Olga Kaganova and James McKellar (eds)

Managing Government Property Assets, edited by Olga Kaganova and James McKellar, is reviewed.

Managing knowledge and intangible assets

This comprehensive handbook is very popular with HR practitioners, line managers, and anyone else who needs an overview of the legal and managerial aspects of managing people in organisations.

In this edition, over 50 chapters have been updated to reflect current workplace relations law, including the new Forward with Fairness Transition Act changes. There is also a new chapter on "Government Funded Traineeships - A guide for HR Professionals".

Definition and quantification of assets

The word ‘asset’ was originally taken into the English language, from the Latin ‘ad satis’ and French ‘asez’, as a term used at law meaning sufficient estate or effects to discharge debts. It later came to be used in the sense of property available for the payment of debts. Assets were understood to be property (objects owned and rights of ownership) that could be exchanged for cash. The importance of factual knowledge of the money equivalents of property and debts, in managing mercantile affairs, was emphasised in accounting manuals during the eighteenth and nineteenth centuries. The rights of investors and creditors to factual up-to-date information about the financial state of affairs of companies, given the advent of limited liability, underscored the early company legislation that required the preparation and auditing of statements of property and debts. During the latter part of the nineteenth century the emphasis in accounting moved away from assets as exchangeable property to assets as deferred costs. Expectations took the place of observables. The abstract (expectational) notion of assets as ‘future economic benefits’ was embraced by accountants in the absence of rigorous definitions of the elements and functions of dated statements of financial position and performance. Assets are quantified financially by a heterogeneous mass of potentially inconsistent rules that, by and large, have no regard for the empirical nature of measurement. Consequently, accountants have failed to provide the community with up-to-date factual information about the financial state of affairs and performance of business entities - and, hence, with an informative basis for financial action.