The Japanese government is calling on domestic companies to disclose information regarding their investments in intangible assets, such as intellectual property, as part of measures to enhance their corporate value, according to guidelines released by the Cabinet Office on Monday.

The guidelines are aimed at encouraging companies to invest in and utilize intangible assets, and also call for increasing the visibility of medium- to long-term profits generated by intangible assets.

Amid a global trend of using intellectual property disclosures to enhance corporate value, the government aims to encourage a shift in mindset among domestic companies.

Corporate intangible assets include not only legal rights such as patent rights, trademark rights and copyrights, but also the technologies, brands, data and organizational capabilities needed to generate them.

In the United States, brand power held by high-tech companies and others accounts for a significant portion of corporate value, and disclosure to investors is becoming more widespread. Furthermore, as this has become a criterion for stock trading decisions in various countries, its importance is growing globally.

The guidelines point out that "strategic initiatives have not progressed sufficiently" among Japanese companies. They emphasize that investment in intangible assets leads to the creation of barriers against competitors and grants pricing power, thereby contributing to a company's growth potential.

The guidelines also characterize intangible assets as "seeds of medium- to long-term success" that, once grown, will allow companies to repeatedly reap their benefits.

Furthermore, the guidelines note that because investment in intangible assets can appear to worsen profits in the short term, it is often difficult to gain the understanding of management and those in charge of financial affairs.

The guidelines call on companies to make the effects of such investments more visible and establish systems for effectively communicating to investors how corporate value is being enhanced. This is intended with a view toward measures including disclosure in annual securities reports.

In addition to calling for cross-departmental personnel exchanges to enable organic collaboration among corporate departments that hold information on customers and other stakeholders, the guidelines also advocate for the appointment of executives in charge of overseeing intellectual property and intangible assets.

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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.

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