PIE-B serves as a supplemental balance sheet

timer Asked: Aug 22nd, 2013

Question description

PIE-B from Chapter 5 of your reading.Cohen (2005) describes how
PIE-B serves as a supplemental balance sheet and a place where we can record
things that add value.The most important feature of the PIE-B is
that it represents an effort to analyze intangibles that is not required or even
permitted by the accounting rules.

To construct a firm's PIE-B, we have
to answer two questions about each thing under consideration: Who owns it, and
to what extent?

One would assume this would be pretty straight
forward.However, consider a great engineer who helps to invent
something remarkable for a company.The company does not own that
persons intelligence, creativity, or educational degrees that come along with
their services.A company would only experience economic benefit
from this as long as the employee stays with the company.

What could companies do to minimize their losses associated with
employees like this who bring value to the organization?


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