Intellectual capital and return on assets.

Return on Asset calculations as a realistic basis of performance measurement for many firms is rapidly going out the window.

On one hand we do the financial calculations, based on the accounting notion of tangible assets in the business, whilst on the other, saying that the primary assets of the business walk out the gate every night and go home.

This  paradox should radically change the ways we measure the return on assets, it creates the need to find ways to consistently measure Intellectual Capital, not an easy challenge, but one that Directors and management need to start grappling with.

Consider, physical assets depreciate with use, but intellectual assets appreciate with use, so perhaps there is a measurement matrix in there somewhere, but probably fashioned by psychologists and anthropologists, rather than accountants.