In 2024, the S&P 500 passed a milestone that most executives missed. Intangible assets accounted for over 90% of aggregate market capitalisation. Not factories. Not machinery. Not real estate. The value resided in software, brands, customer relationships, proprietary data, trained workforces, and organisational processes.
Yet most companies cannot measure these assets with any precision. Balance sheets capture only a fraction of intangible investment — those acquired in business combinations or meeting strict capitalisation criteria under IAS 38. The rest is expensed, invisible, and unmeasured.
This guide provides a complete framework for measuring intangible capital — from understanding what it includes, to selecting the right metrics, to building a measurement system that informs strategy.
Intangible capital is the stock of non-physical assets that generate economic value over time. It is formed through intangible capital formation — sustained investment in knowledge, relationships, systems, and capabilities.
The term encompasses far more than patents and trademarks. In the Corrado-Hulten-Sichel (CHS) taxonomy — the most widely adopted framework in economics — intangible capital spans six categories: computerised information, innovative property, economic competencies (including brand, training, and organisational design), and more.
Intangible capital is not a theoretical concept — it is the measurable result of investment in knowledge, technology, brand, and organisation. The measurement challenge is not whether intangible capital exists, but how to quantify it with the same rigour we apply to physical capital.
For an introduction to what the main types of intangible assets are, see our FAQ.
Understanding intangible capital requires distinguishing it from related but distinct concepts. Intangible capital refers to the accumulated stock of non-physical productive assets. Intangible assets is the accounting term for those that meet recognition criteria under financial reporting standards. And intellectual capital is the broader management concept covering human, structural, and relational capital.
The CHS framework, developed by Carol Corrado, Charles Hulten, and Daniel Sichel, classifies intangible investment into three broad groups containing six categories.
This includes software development (both purchased and in-house), databases, and digital platforms. It is the most readily measured category because software spending is already tracked in most organisations.
Key metrics: Annual software development spend, capitalised vs expensed software costs, database size and refresh rate, platform development velocity.
This covers R&D expenditure, mineral exploration, creative assets (design, artistic originals), and financial innovation. R&D is the largest component for most technology and pharmaceutical companies.
Key metrics: R&D intensity (R&D spend as % of revenue), patent applications and grants, new product revenue share, time from R&D to commercial launch.
This is the broadest and most difficult-to-measure category. It includes brand equity, firm-specific training, organisational capital (management practices, business processes, corporate culture), and customer capital.
Key metrics: Brand awareness scores, training spend per employee, employee retention rate, process maturity indices, customer Net Promoter Score.
A mid-market SaaS company spending £2M annually on customer success, £500K on internal training, and £1.5M on marketing is investing £4M per year in economic competencies. None of this appears as an asset on the balance sheet, yet it directly drives customer retention, employee productivity, and brand recognition.
Companies that cannot measure their intangible capital face a systematic valuation discount. Investors and acquirers assign lower values to assets they cannot see, understand, or verify. This is the intangible asset intensity problem — the more intangible-intensive a business, the wider the potential gap between its true productive capacity and its reported asset base.
Without measurement, intangible investment decisions are made on instinct rather than evidence. Should you increase R&D spending or marketing spending? Should you invest in training or hire externally? These are capital allocation decisions, but without intangible capital metrics, they are treated as operating expense decisions.
Current accounting standards — IAS 38 in particular — recognise only a subset of intangible assets. Internally generated brands, customer lists, training programmes, and organisational processes are explicitly excluded from capitalisation. This creates a structural reporting gap that voluntary disclosure can begin to address.
For a deeper understanding of what accounting standards do and do not capture, see Can you capitalise intangible assets on the balance sheet? and What is IAS 38 and how does it affect intangible asset reporting?.
Start by cataloguing all spending that creates long-lived intangible value. Use the CHS categories as a checklist.
Review your P&L line by line. Identify all expenditure that creates value beyond the current period: R&D, software development, training, marketing, process improvement, design.
Map each investment to the appropriate CHS category. Some items span categories — a customer data platform involves computerised information and economic competencies.
Assign an estimated useful life to each investment category. Software may depreciate over 3-5 years. Brand investment may have a longer horizon. Training depreciates as employees leave.
Apply the perpetual inventory method: accumulate annual investments and subtract depreciation to arrive at the current stock of intangible capital in each category.
Different categories require different measurement approaches. The table below provides a starting framework.
| CHS Category | Investment Proxy | Stock Metric | Outcome Metric |
|---|---|---|---|
| Computerised Information | Software dev spend | Capitalised software value | Platform uptime, feature adoption |
| Innovative Property (R&D) | R&D expenditure | Patent portfolio value | New product revenue share |
| Innovative Property (Design) | Design spend | Design system maturity | Conversion rate, NPS |
| Brand Equity | Marketing + PR spend | Brand awareness index | Organic acquisition %, price premium |
| Training | L&D spend per employee | Skill coverage score | Productivity per employee |
| Organisational Capital | Process improvement spend | Process maturity index | Cycle time, error rate |
Intangible capital metrics are most useful in context. Benchmark against industry peers where data is available (NESTA and the ONS publish sector-level intangible investment data for the UK). Track quarter-over-quarter trends to identify whether your intangible capital stock is growing or depleting.
Depreciation of intangible capital is real but often ignored. A trained workforce depreciates as employees leave. Brand equity depreciates without sustained investment. Software becomes obsolete. Any measurement framework must account for both investment and depreciation.
When the goal is not just measurement but valuation — assigning a monetary value to intangible capital — several established methods apply.
The Relief-from-Royalty method values an intangible asset by estimating the royalty a company would pay to license it from a third party. This is commonly used for brands, patents, and technology.
The Multi-Period Excess Earnings Method (MPEEM) isolates the earnings attributable to a specific intangible asset after deducting returns on all other assets. It is the standard method for valuing customer relationships.
The Replacement Cost method estimates what it would cost to recreate the intangible asset from scratch. This is commonly applied to software capital and assembled workforces.
The Opagio Valuator provides calculators for each of these methods, allowing you to model intangible asset values with your own inputs. For a broader assessment across all intangible categories, the Intangibles Questionnaire provides a structured evaluation.
Measuring intangible capital is not straightforward. Several pitfalls trap even experienced teams.
Confusing spending with investment. Not all spending creates lasting value. A poorly executed training programme is a cost, not an investment. Measurement must distinguish productive investment from wasteful expenditure.
Ignoring depreciation. Intangible capital depreciates — sometimes faster than physical capital. Software becomes obsolete. Key employees leave. Brand equity fades without reinforcement. Any measurement system that only tracks investment without depreciation will overstate the capital stock.
Over-relying on financial proxies. Spending is easy to measure but is only a proxy for the value created. A company that spends £5M on R&D but produces nothing commercialisable has lower intangible capital than one spending £2M that generates three new products.
The biggest measurement mistake is doing nothing. Imprecise measurement of intangible capital is vastly more useful than no measurement at all. Start with what you can measure, refine over time, and do not let the perfect be the enemy of the good.
The UK is a global leader in intangible capital research. NESTA's landmark studies with Imperial College and the University of Glasgow have produced the most comprehensive national-level intangible investment data outside the United States.
UK businesses invest approximately £185 billion annually in intangible capital — more than they invest in physical capital. This inversion happened in the early 2000s and the gap has widened since. Yet national accounts still do not fully capitalise intangible investment, meaning GDP statistics understate the UK's true productive capacity.
For UK-specific data and trends, see our detailed analysis in Intangible Capital in the UK Economy.
Intangible capital measurement does not require a large team or expensive consulting engagement. Start with three steps.
First, use the Opagio Intangibles Questionnaire to assess your current intangible capital across all categories. It takes 10 minutes and produces a structured report with scores and benchmarks.
Second, identify the two or three intangible categories most critical to your business. For a SaaS company, this is likely software capital and customer relationships. For a professional services firm, it is human capital and brand equity. Focus your measurement effort there.
Third, begin tracking intangible investment alongside your financial reporting cycle. Add an intangible capital section to your board pack. Over time, this creates the longitudinal data needed for meaningful trend analysis and strategic decision-making.
The Intangible Asset Masterclass in the Opagio Academy provides a structured learning path through the theory and practice of intangible capital measurement, including worked examples for each CHS category.
About the Author
Ivan Gowan is CEO of Opagio, where he leads the development of tools and frameworks that help businesses measure and grow their intangible assets. With 25 years of experience in financial technology — including leadership roles at IG Group and Currency.com — Ivan brings a practitioner's perspective to intangible capital measurement and valuation. Meet the team →
The Corrado-Hulten-Sichel (CHS) framework is the standard taxonomy for classifying intangible investment. This deep dive explains all six categories, how they are measured, and why the framework changed how economists think about growth. Structured diagram of the CHS framework showing three groups and six categories of intangible investment with interconnected nodes
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