Purchasing

Mary Walker

What about finances?
June 4, 2007

When I grew up my mother and father never talked about finances.My father was an engineer and my mother was a stay at home mom.I know we were not poor, but we did not live in the Highland Park area in Dallas, the high class section.

I never was concerned about the light bill or gas bill, or even how the food got on the table, it was just there when I was growing up.It does not take long, once you get your first pay check to understand the value of money.I was reading a book the other day, where a member of ISM said he could remember when he stayed at the Waldorf Astoria for $7.00 per night for one of the ISM Conventions.Wonder what it is now?

At the ISM conference in Las Vegas, ISM had a listing of supplemental reading for the new certification coming out, the CPSM.One book that I bought was “Finance for Managers” Harvard Business School.I have taken Accounting I and II, numerous other courses in different areas of accounting.I know for sure I would not want to be a cost accountant.I did like the studies on Financial Statements.I took a course one time from Merrill Lynch on “How to Read a Financial Report”.This is great information that deals with the financial statements used in business every day.

In the book “Finance for Managers” there is a question as to whether the balance sheet should reflect the value of human capital and profit potential.Some companies are considered knowledge-intensive.They are claiming the work-force know-how, intellectual property, brand equity, and customer relationships are the real productive assets.Should this be an added line to the balance sheet?

How do you put a price tag on what a person knows?Do you base it on IQ, the salary, or the dollars you think they contribute to the company?Possibly a salesman could be measured on dollars from his customer accounts.Then if you have several people in the know-how category, do you put the same value on all of them, or is one’s know-how better than the other.The old saying, never discuss salary, would then have to include, never tell anyone what you are valued at on the balance sheet.Would this be one lump sum on the balance sheet, or would you have to identify the person.

In January 2000, Alan Greenspan, Board Chairman with the Federal Reserve Board, stated accounting failed to track investments in “knowledge” assets. Former SEC chairman, Arthur Levitt, agreed with Greenspan.

Harvard Business Essentials states that the accounting profession is beginning to debate the pros and cons of including these intangible assets in financial statements.It states watch for future developments.This is 2007 and I have not seen anything in this area as yet.I know some companies claim their employees are their assets.This is true.

People make a company great. Many jobs are classified in categories of training and knowledge.You get paid more if you are rated in the top level.I guess you could put “know-how” people in categories or groups and put a dollar value on it.

I am sure the CPA’s will figure this all out for us.

Posted by Mary Walker on June 4, 2007 | Comments (0)