More detail on estimating intangible and tangible assets
The System of National Accounts (SNA) is a statistical framework that provides a set of macroeconomic accounts for analysis and research purposes. Components of intangible investments, however, do not fall conveniently within the scope of the SNA and estimation methodologies can vary by country. While some countries follow the SNA recommendations around the measurement and treatment of intangible investment— namely, investment in intellectual property products — other countries (including the United States) are yet to do so. As such, the figures reported in the Australian Intellectual Property Report 2013 (the report) and those detailed below on the stock of Australian and US intangible and tangible assets will be subject to variation in line with changes to national accounting frameworks and estimation methodologies.
Comparability of tangible asset bases
In the report, we claim that the ratio of the current value of the private stock of Australian intangible assets to the equivalent tangible asset base is 4 per cent compared to 91 per cent in the United
States (US).
The underlying data used for the US and Australian tangible asset bases, however, differ in important ways which prevent an equal comparison. The calculation for the US figure of $15.9 trillion in 2011 is based on non-residential, private fixed assets net of intellectual property products
(that is, net of software and mineral exploration). In comparison, the Australian figure includes general government assets as well as ‘non-produced’ assets for a variety of natural resources.
Correcting for these inconsistencies, we construct the equivalent number for Australia using the sectoral balance sheets from the Australian National Accounts (see Table 1). The result for Australia is a tangible asset base for 2010-11 of approximately AUD$1.8 trillion in current values (compared to
AUD$6.9 trillion presented in the report).
Table 1: Australian tangible asset base, 2010-11 (Non-residential, private fixed assets )
Economic sector
Household (incl. Unincorporated) a
Asset
Machinery & Equipment
Non-dwelling construction
AUD$ billion
110.4
233.1
Financial Corporations Machinery & Equipment
Non-dwelling construction
15.3
58.2
Non-Financial Corporations b
Total
Machinery & Equipment
Non-dwelling construction
397.9
992.4
1807.3 a) The Australian Bureau of Statistics (ABS) Household sector includes unincorporated enterprises that are engaged in the production of goods and services. We treat the value of the household sector’s machinery & equipment and non-dwelling construction assets as the asset base of these unincorporated enterprises and hence as ‘non-residential’. b) Some proportion of the non-financial corporation sector’s asset base is owned by the public sector. However, because the ABS does not disaggregate the asset base into public and private we apportion the full share to the private sector.
Source: Australian Bureau of Statistics (ABS) catalogue no. 5204.0 (2011-12 eds).
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More detail on estimating intangible and tangible assets
Comparability of intangible asset bases
There are very few estimates of intangible assets for either the US or Australian economy’s let alone cross-country estimates based on a consistent methodology. The report implies an estimate for
2010-11 of approximately AUD$258.6 billion 1 for the current value of Australia’s intangible asset base and USD$14.5 trillion for the US in 2011.
The Australian estimate (De Rassenfosse 2012) is based on a methodology described in the
Productivity Commission working paper titled Investments in Intangible Assets and Australia's
Productivity Growth: Sectoral Estimates (Barnes 2010) which uses expenditure based measures from the Australian National Accounts as well as various ABS business surveys and independent surveys to estimate the value of Australia’s intangible assets.
The US methodology (Hassett and Shapiro 2012) estimates the value of intangible assets based on the on/off balance sheet value of US companies. For example, the off balance sheet value of intangible assets is defined as the difference between the market value of companies and their book value where the book value is analogous to the value of their tangible assets.
Although the estimates are based on different methodologies, the accounting definition of intangibles is broadly consistent. That is, both estimates include computerised information
(e.g., software), innovative property (e.g., Research and Development) and economic competencies
(e.g., firm-specific human capital and brand equity).
Revised estimates for the ratio of intangible to tangible assets
The revised ratio of the current value of Australia’s intangible assets to tangible assets is approximately 14 per cent (Table 2).
Table 2: The Ratio of Australia’s intangible to tangible assets (2010-11)
Asset base AUD$ billion
Intangible
Tangible
Intangible/Tangible
258.6
1807.3
14.3%
Developments in the near term
The US Bureau of Economic Analysis is planning to release comprehensively revised National
Accounts in July 2013 including an accounting framework for intellectual property products consistent with the recommendations in the 2008 SNA. This innovation will enable better cross country comparisons of the level of investment in intangible assets.
1 Note that the report presents the inflation adjusted figure for Australia’s intangible assets (AUD$249 billion).
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More detail on estimating intangible and tangible assets
References
Barnes P. (2010). Investments in Intangible Assets and Australia’s Productivity Growth: Sectoral
Estimates. Productivity Commission.
Bureau of Economic Analysis. (2013). Preview of the 2013 Comprehensive Revision of the National
Income and Product Accounts: Changes in Definitions and Presentations. Accessed June 2013. http://www.bea.gov/scb/pdf/2013/03%20March/0313_nipa_comprehensive_revision_preview.pdf
De Rassenfosse G. (2012). Intangible Assets and Productivity Growth. Report for the Australian
Government Department of Industry, Science, Research and tertiary Education.
European Commission, International Monetary Fund, Organisation for Economic Co-operation and
Development, United Nations and World Bank (2009). System of National Accounts 2008.
Hassett K & Shapiro R. (2011). What ideas are worth: The value of intellectual capital and intangible
assets in the American economy. Accessed June 2013. http://www.sonecon.com/docs/studies/Value_of_Intellectual_Capital_in_American_Economy.pdf
Pink B. (2012). Australian System of National Accounts: Concepts, Sources and Methods, 3 rd eds.
Australian Bureau of Statistics.
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