Financial Reporting Tip: Intangible Assets

As a sole proprietor CPA, the value of my practice is comprised of intangible ideas, relationships, and processes.  By its nature, the monetary value of this “asset class” is difficult to quantify or communicate in an objective manner.  This disconnect has never sat well with me, as I always feel shortchanged by financial statements that omit my most valuable resources.  As you could imagine, this dilemma is particularly frustrating to a service professional whose career routinely involves reporting financial information.

Last week, I completed my December 31, 2016 (annual) financial statements, and I am happy to report my progress for reporting on the aforementioned intangibles that are crucial components of my CPA practice.

For starters, I used the Management Discussion & Analysis to describe the importance of key performance indicators (KPIs) as performance measures and evaluation tools.  My explanation of these metrics was accompanied by Non-Financial Highlights and a reminder that combining KPIs with traditional financial information often results in a more comprehensive understanding of my practice.

In addition, I included a supplemental schedule titled, Value Drivers of Wright Accounting & Consulting, L.L.C., wherein I listed the ideas, relationships, and processes that create value for my practice.  Below are a handful of items documented within this schedule:

  • CPA firm permit from the Louisiana State Board of CPAs,
  • 10 years of experience working in public accounting industry,
  • Information System (hardware, software, secure network, etc.) designed to facilitate growth,
  • Internally developed marketing strategy (including firm logo, company blog/website, e-newsletter mailing list, social media presence, etc.), and
  • Established client base

In the comments section below, please provide your thoughts and ideas for financial reporting on intangible assets.

 

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