Knowledge balance sheet explained

A knowledge balance sheet is an instrument for structured identification, representation and development of intellectual capital. It shows the connections between organizational goals, business processes, intellectual capital and business success. It is able to reveal the mutual influence between the factors of success and the most efficient investment levers, specifies the strategic direction for knowledge management processes and checks the degree to which they have been implemented.^[1]

Two views

View from the

• outside as a reporting instrument: stakeholders obtain reliable data on the intangible assets and on the future-fitness of the enterprise.
• inside as a management instrument: the measurement and assessment of the intellectual capital can be systematically controlled, developed and reflected upon.

Benefits

• uncovering weak spots and potentials for maximizing business success
• transparency
• cost/benefit ratio of knowledge development
• communication with shareholders
• organizational development
• capital acquisition
• cooperation
• customer orientation
• understanding of interrelationships
• synergies with existing mgmt. systems (QM, risk mgmt.)

Indirect benefits

• gathering and definition of intellectual capital allows clearer communication
• employees understand their company better
• process optimization and innovation
• increased attractiveness for employees and cooperation partners

Prerequisites

• Management systems should already be utilized
• Management (openness, willingness to talk/engage dialog, recognition)
• openness for employees
• anxiety-free corporate culture
• documented and communicated business strategy

Criticism

• Lack of generally recognized system
• generally not verified by auditors
• connection between knowledge balance sheet and future revenue opportunities difficult to verify
• may exacerbate the asymmetry of knowledge between management and outside stakeholders
• possible misuse as a marketing instrument

See also

• Information management
• Balance sheet

References

• 2013. Ju-Chuan Wu, Chinho Lin. A BALANCE SHEET FOR KNOWLEDGE EVALUATION AND REPORTING .

Notes and References

1. IAS 39 International Accounting Standard 39: Financial Instruments: Recognition and Measurement