CFA Institute's Matt Winters: Reform needed to fix company valuation and financials disconnect

Intangibles accounting needs improvement

Financial reporting rules must keep up with changes in the business environment to remain relevant.

One area where the rules have not kept up is the accounting for intangibles, including software, brands and research and development. The accounting rules treat intangibles largely as expenses, not as investments. These rules have not changed meaningfully since the late 1970s and, as a result, the key drivers of today's leading companies are often invisible on their financial statements: think Apple's iOS and Novo Nordisk's blockbuster weight loss drugs – key company components that are both largely absent from the balance sheet. BP profits tank as CEO promises 'new direction' H...