Generally, it is argued that intangibles are too uncertain and risky to be considered assets and to be capitalized. Some detractors, such as John Rutledge, the chairman of a Rutledge & Company, claims that there is no relationship between a company’s knowledge and its application of that knowledge. For example, if Company X has a genius working in R&D, it is a positive thing. But if his work does not generate cash flow, he is not an asset to Company X.Accountants resist accounting for IC because accounting in today's world is complicated enough without trying to put a price tag on the growing knowledge base within an organization. Some of the measures required by IC reports are complicated to obtain, and are not guaranteed to be accurate. On this front, firms fear shareholder lawsuits based on inaccurate representation of IC.In the past, the theory of “goodwill” has functioned as the market's way of pricing the intrinsic value of a company, including its knowledge base. One element of goodwill is "turn-key" value (this concept acknowledges that an on-going business has more value than the same business in the start-up stage). Turn-key value encompasses knowledge capital. Using generically applied knowledge management concepts, companies can generate substantial savings across most corporate departments.Another fear is that amortization of capitalized values for intangibles could be misused by corporations. Under IC accounting, intangibles would be capitalized over their expected life rather than expensed immediately. This methodology leaves room for corruption on the part of the firm, or at least accusations of corruption. In 1994 and 1995, AOL was attempting to acquire a larger customer base. AOL capitalized some of its customer-acquisition cost, citing the customer base as an asset. Immediately, they were lambasted for manipulating their financial records, and after much deliberation, AOL gave up and ex...
