What is intellectual capital?

Intellectual capital is the value of a company's employee knowledge, skills, business training, or any proprietary information that may provide the company with a competitive advantage .

Why is intellectual capital a nebulous asset?

Because of the nebulous nature and defining features of intellectual capital, it is also referred to as intangible assets and environment. Intellectual capital is most commonly broken down into three categories: human capital, relationship capital, and structural capital.

Is intellectual capital a taxable asset?

Intellectual capital is considered an “asset” but is not accounted for on a company’s balance sheet, though some of its value is captured in intangible assets like goodwill and intellectual property. Therefore, a company’s financial statements may not reflect the value of its human, relational, or structural capital.

How can a company bolster its intellectual capital?

A company can also bolster its intellectual capital by hiring qualified individuals and process experts who contribute to its bottom line. For example, a mechanic graduates from technical school and starts work at an automobile manufacturer. Their intellectual capital consists of the knowledge they learned at school.