Worldwide government, firms and project teams is facing a difficult situation to measure the value creation through information technology. This essay argue that the challenges of measure value creation through IT are occur in three different levels which are Macro-economic level, Micro-economic level, and project level. Some studies and cases have been used to demonstrate those challenges. Although, the problems on current evaluation system can be fixed as we can find the reasons and drive of those problems. There is couple reasons result those challenges. For Macro-economic level and Micro-economic level, there is a lack of well-established classification and identification. ...view middle of the document...
For many companies, their investment in such intangible assets exceeds the investment in physical assets (OCED 2013, p. 3). As the twenty-first century coming, more and more businesses conducted over the Internet, with rapidly growing recently (Amit & Zott 2001, p. 493). They have gained highly competitive characteristics through information technology (IT). For those organisations, their intangible assets are existed based on Internet, which associated with IT to store, retrieve, transmit and manipulate data. However, currently businesses lack evaluation system for measuring the value creation of intangible assets associated with IT. Although, the problems on current evaluation system can be fixed as we can find the reasons and drive of those problems.
The rest of this essay is structured into four sections which are: the challenges in measure value creation activities through information technology (for accountant), why challenges, the approaches for addressing the problem, and conclusion. The first section would address several challenges on current accounting evaluating system for measuring value creation through information technology. Secondly, this article would identify the cause of challenges mentioned in the first section. The next one is about the way and recommendations to solve the problems mentioned in the first section based on the analysis in second section. Finally, there is a conclusion.
The challenges of measuring value creation activities through information technology (IT)
IT expenditure has become a major component for both developed and developing countries. In 2008, the total spending on IT around world is 3.4 trillion. Also, spending on IT operation generated 1.5% of a company’s revenue (Gillon & Hodgkinson 2008, p. 9). IT typically represents a major area of capital expenditure in economics and businesses of all sizes. Much value of IT and activities through IT lines in what accountancy practice refers to as ‘intangible assets’. Web-technology, program, website and online networks are example of such assets. They are ‘intangible;’ meaning they cannot be ‘touched;’ they cannot be grasped like material assets; they cannot be easily costed, counted and quantified. Therefore there are difficulties in measuring the value creation through IT, which present challenges in Macro-economic level, firm level, and project level.
For Macro-economic level, one of the major challenges for current national accounting system is how to appropriately measure the contribution of intangible assets. As the E-commerce economy developed, estimating that contribution to national productivity and identify the role of IT investment as a driver for economic growth will be essential if governments are direct investment and resources in the most effective manner (Gillon & Hodgkinson 2008, p. 10). The OECD identified the most of reasons are inadequate government data to enable identification of IT investment, as a partial...