The majority of companies today have a much higher market value than book value. A company’s value is reflected in its market value but remains hidden in company accounts. The gap consists of intellectual capital. The most common theory for measuring and valuing intellectual capital is the market value relative to book value.
The purpose of this paper is to investigate how the gap between the book value and the market value can be reduced. This is achieved by creating a new model for intellectual capital which takes more consideration to generally accepted accounting policies than previous models.
We have reached the conclusion that the most appropriate way to account for intellectual capital is to present it in an independent model. The presentation should be done with a few simple and standardized indicators that could apply to virtually all major companies. The result of this model will lead to a decrease between companies’ market value and their book value.