Critics complain that the current accounting model is inadequate for measuring the performance and resources of knowledge‐based companies because (1) expenses are not matched properly with related revenues, and (2) many important “assets” (e.g., patents, copyrights, brand names, employee expertise) are omitted from corporate balance sheets or, if reported, are valued at nominal amounts. The purpose of this exercise is to examine whether these criticisms are valid and discuss whether the current accounting model can be improved to better measure the performance and resources of information‐age companies.

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