Knowledge Accounting

Dan Stone and Sony Warsono have written an article about Accounting and it's use of knowledge management, or the lack thereof. The industry has recently taken many criticisms that focus on two main points:

• The engine of economic productivity in the "new" economy is knowledge, not physical capital


• Financial and mangerial accounting are trapped in an industrial and organizational model in which physical capital is the primary productivty enabler.

The question is...can one assert that accounting has failed the knowledge management revolution? In this article they examine the determinants of the value of accounting information and the economic and institutional forces that shape existing knowledge accounting information; and discuss 6 proposed alternative methods of knowledge accounting.

1. Total Value Creation
2. Accounting for the Future
3. Balanaced Score Card
4. Skandia Navigator
5. Imaginable Asset Monitor
6. Value Chain Scoreboard

OK...I'm not going to go into details on what those are, but feel free to look it up...interesting stuff...Here's my summation of the whole deal...

As we all know, accounting, for the most part, is a concrete deal. There are numbers that are generated by sales, expenses, etc that turn into charts and graphs and financial statements. Knowledge management, on the other hand, is abstract...like our thoughts. It can go anywhere you want it to. The thing that makes Knowledge Accountitng a second choice is the lack of reliability due to the very nature of knowledge. Claims are that the basic accounting model is irrelevant in the face of these changing economic conditions. There needs to be a merger of these concepts.

I personally believe that with the very nature of business these days, the same outdated systems of accounting cannot be relied on. We know this by looking at the banking industry and various executives who have fallen to money schemes gone bad. There has to be a system of "thought" incorporated into how we operate our money. The days of looking at numbers and takign them as truth has passed. We've got to get smart about it!