Bill -
>
> I have always
described KM activities and resources, projects and people, as
investments, not costs.
>
How
do CFOs respond to calling KM efforts “investments?”
A bit
of background:
(anyone
with more current knowledge of accounting practices, please
correct me)
I’m
looking at this as software & systems for internal use.
By
the rules of FASB (Financial Accounting Standards Board) 86
for software systems:
1/ - spending through
proof-of-feasibility is expensed
2/ - system construction
spending is capitalized & depreciated over 3 years
3/ - after completion
maintenance/repairs are expensed
Obviously these rules do not directly address the
inconvenient fact that the bulk of KM work is human work, not
tools.
There are a variety of forces in play here.
4/ - Accountants are very conservative.
5/ - They do not like to put hard-to-value resources
on the balance sheet.
6/ - The intangible aspect of “goodwill” is an
excellent example. Just look at the Kraft-Heinz fiasco where
they had to write down $1.2B in “intangible assets.” Looks bad.
7/ - If software projects — an ERP implementation?
— were put on the balance sheet, the frequency of such
large-scale efforts being cancelled is such that it would look
bad to regularly write off large amounts of defective “assets.”
Much safer to just dribble the spend through the income
statement as G&A.
8/ - It can potentially be dangerous to have juicy
assets on the balance sheet… because eventually the tax man will
notice & demand their cut.
9/ - Solid software & process management (aka
KM) can become more rather than less valuable over time.
A significant conundrum for double entry
bookkeeping.
See: H. Thomas Johnson’s Relevance Lost
- David
