Capital Assets

A business capital asset is an asset with a useful life longer than a year and is not intended for sale in the regular course of the business’s operation. Traditionally this definition has only applied to tangible assets such as property and equipment. In modern services and digital businesses, however, long term value growth is more likely to rely on the effective management and use of assets which are intangible. This gives rise to problems, when valuing both large and small companies, because accounting standards do not recognise and capitalise a high percentage of these types of intangible assets. On the other hand, capital markets do recognise the contributions that, for example, the firm’s human, digital and organisational capital do make to a proper valuation of the firm. As a result, there is often a substantial difference between the book vale and market value of the most successful firms.