To touch or not to touch? That is the question that’s been troubling Richard Poole.
Here he explains why…
Having spent most of my career working in the service sector I often ponder over the question as to whether a tangible item (e.g. a product) has more perceived valuable than an intangible item (e.g. a service).
When teaching financial accounting papers, or when talking to my clients about their financial accounts, I am often asked to explain the difference between tangible and intangible assets.
The Conceptual Framework defines an asset, and explains when a business should recognise the asset in the financial statements.
The definition:
1) Assets must give rise to future economic benefits for the entity.
The recognition criteria:
2) It is probable that any future economic benefits associated with the asset will flow to the entity.
3) The asset has a value that can be measured reliably.
In the context of a business, if we think about this in relation to a tangible asset (e.g. a delivery lorry):
1) Future Economic Benefit? YES
2) Probable Future Economic Benefit? YES
3) Measured reliably? YES
In the context of a business, if we think about this in relation to a intangible asset (e.g. A brand or knowledge):
1) Future Economic Benefit? NO
2) Probable Future Economic Benefit? NO
3) Measured reliably? NO
In terms of my own career, I regularly ask the question ‘what adds value?’
1) How valuable is a tutor’s knowledge to a student?
2) How valuable is a tax return to a client?
Taking each question in turn…
1) How valuable is a tutor’s knowledge to a student?
Students contact me every day and expect me to give my notes, mock exams and tips away to them for free. Why would they expect me to oblige?
I have always been happy to support and advise any student at little/minimal cost, but it is important that the longer-term investment into my product is valued.
My student exam pass rates percentages have on average always been in the 80s and 90s and this is because I have experience (both as a tutor and as a marker) of question approach, exam technique, key questions, relevant articles and top tips for all areas that I teach.
Do students generally appreciate the intangible value that a tutor brings to the classroom?
– From my businesses point of view, the question is: can I recognise my knowledge and experience in the classroom on my business’s balance sheet?
Based on the Conceptual framework above, clearly the answer is no.
2) How valuable is a tax return to a client?
As with my tutoring, I have always prided myself (when servicing my clients) on:
1) Charging a very fair price.
2) Offering a value for money service.
3) Going the extra mile.
I sent out an invoice on 1 February (following the recent 31 January tax return submission deadline) and one client (who had received some tax planning advice and received a tax refund as a result) emailed two questions to me:
• ‘How is your fee calculated?’; and
• ‘Why is your fee slightly up on last year?’
It was the client’s perception of value that fascinated me once again.
My years of intangible experience to enable me to advise the client properly had taken second place to the tangible pound’s value in the client’s mind!
Again, from my businesses point of view, the question is, can I recognise my knowledge and experience in tax on my business’s balance sheet?
Based on the Conceptual framework above, clearly the answer again is no.
If you had a business and you were thinking about recognising your tangible or intangible assets:
1) Would you like the value of knowledge/ expertise to be recognised as an asset?
2) Would you put a higher value on tangible items compared to intangible items?
Therefore, does a business offering an excellent service have to work harder than a business offering an excellent product to achieve the same perceived value with customers?
• Richard Poole is a freelance classroom lecturer and online tutor with FME Online
