Baruch Lev, a well-respected accounting professor at New York Universitys Stern School of Business, has commented about

Question:

Baruch Lev, a well-respected accounting professor at New York University’s Stern School of Business, has commented about the lack of relevance in today’s financial statement. He notes that the 500 largest companies in the United States have market-to-book ratios (the ratio between the market value of the company and its value [total assets – total liabilities]) that, on average, are greater than six. What this means is that the reflects only 10 to 15 percent of the value of these companies. He claims that intangibles are fast becoming substitutes for physical assets. PR Newswire reported. “The traditional standards of financial accounting-measuring a company’s book value based solely on physical assets that appear on the balance sheet-is becoming obsolete.”
REQUIRED:
What is Professor Lev referring to when he mentions intangibles? Explain the reasoning underlying his claim. Do you agree with him? Why or why not?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...