What is new in economy?

It is now commonly accepted that we are in the midst of a new phase of evolution in the major global economies, which is characterized by new performance and value drivers that are mainly intangible. So-called intangible or knowledge economy is the new environment that companies have to learn to cope with. During the last two decades most industrialised economies have progressively moved towards a knowledge-based rapidly changing economy where investments in human resources, information technology, R&D and advertising have become essential in order to strengthen a firm’s competitive position and ensure its future viability.

With the transition to a knowledge-based economy, the principal source of economic value and wealth is no longer the production of material (tangible) goods but the creation and management of intangible assets. In other words, economic growth is not as much influenced by investments in physical capital (i.e. land, machinery etc.), as by intangible assets which is a critical determinant for the productive and exploitation of physical capital. Consequently, some companies depend on being able to measure, manage and develop their intangibles.

This new phase is having profound implications also for corporate accounting and reporting. It is well known that there is a gap between the accounting book value and the market value of many internationally-listed companies as well as polish. There is also widespread concern about the difficulty of valuing and assessing the performance of 'new economy' companies. Some companies have recognized this new phase and started to produce reports which are largely different from the traditional, financially-oriented ones. (Some examples will be presented in next chapter 3). These reports may take different names (intellectual capital report, auxiliary balance sheet, report on intangibles etc), but they have a common goal of penetrating beyond the financial dimension in order to identify and track the new value drivers - mainly of an intangible nature - which permit long-term, sustainable growth of the company.