News Letter

TOWARDS AMETA THEORY OFACCOUNTING FOR KNOWLEDGE MANAGEMENT: REVIEW THE

REALITIES TO STAGE THE CRITICAL THINKING OF KNOWLEDGE BUSINESS MODEL

SBE, Vol.20, No.1, 2017

ISSN 1818-1228

Qatar University

not have a physical or financial embodiment;

second it’s internally generated, developed, and

practiced; and finally its non-tradable which

means cannot be readily bought or sold (Austin,

2007). The virtual nature of knowledge assets

was further complicated their management

and accounting. Unlike the physical assets, the

knowledge assets are unique assets expected

to have value (because of its uniqueness)

which play important role in increasing return

on scale. A real understanding for the nature

of these concepts has been developed (See

Table-I). The virtual nature of knowledge

assets further complicates their accounting.

Accordingly, knowledge assets are reflected by

investment in research and development. The

imperatives of knowledge management entail

a new accounting paradigms for measuring

and reporting research and development.

The reporting power has so beautifully

disclosed the operational transactions for

a half-millennium. The balance sheet is

now failing to keep up with the wave of

knowledge management. The accounting’s

failure to disclose knowledge capital is not

just a theoretical problem. It costs all the

stakeholder’s money and time.. Accounting

does not recognize the internally generated

intangibles such as research and development,

brands, and employee talent. These assets are

the engine of knowledge management (Lev,

and Gu, 2016). This accounting treatments

underestimate financial performance of

successful knowledge management. Today,

accounting face a situation in which it says that

knowledge assets are valuable and tend to be

the future of business organizations, but cannot

say how (Blagu and Lekhi, 2009). The problem

of accounting against knowledge lays in the

ways of measuring and reporting knowledge

assets. The financial statements have been the

white and black screen to show the operational

assets images for a half-millennium.

Unfortunately, these statements are now failed

to show knowledge assets colored images.

The accounting model is acting as convertor

to turn these images. The accounting’s failure

to generally measure and disclose knowledge

assets is a theoretical problem with dramatic

side effects. Uncertainty is one of recognition

problem and because of that, accounting

recognizes poorly (or partially) knowledge

assets such as research and development,

brands, and employ talent. In contrast, these

assets are considered the value engine of

knowledge business model (Lev and GU,

2016). The problem of accounting is that does

not recognize internal knowledge management

initiatives such as technology under

development, knowledge of the employees,

manufacturing arrangements, and marketing

anddistribution systems (Canibano

et al

., 2000).

Accounting only recognizes knowledge assets

purchased from others in spite of the internal

investments is a key source of future profit.

This evaluation rule underestimates figures of

successful knowledge initiatives and business

performance. The inconsistencies of accounting

rules that related to knowledge assets under

both GAAP and IFRS diminish the usefulness

of the financial statements. These deficiencies

have been empirically explored in several

research projects that suggest loss of relevance,

comparability, consistency, and neutrality

(Smalt and McComb, 2016). The accounting

model by its status qua is insufficient to match

knowledge rituality. This view is circulated

in most of the business and accounting

literatures due to sum of the shortcomings

and lacks. However, the discussions centered

on the fact that the traditional accounting

theory is not providing a source of significant

differentiation (See Table-I). The company’s

viability depends directly on the competitive

advantages of its knowledge assets (Holsapple,

2003). Extant researches that have discovered

nature of knowledge assets served as the

data source for conceptualizing the new