Capital asset
From eg
A capital asset is any asset that generates a product, service or another capital asset. This definition is independent of who owns it or whether it is ever valued in terms of financial capital, e.g. a spinning wheel in a village that is only used to create garments in one home for one family is considered a capital asset. The microcapital movement aims to find and finance small opportunities of this kind, for instance, to improve the capacity of an expert spinner to make garments to sell. See finance best practice.
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[edit] operational distinctions
All management accounting must make operational distinctions between capital assets so as to identify the different ways they are improved, repaired, copied and protected from damage. It must also distinguish between all types of cashflow, to keep total cost of operations separate from acquisition or sales of capital assets - a capital cost allowance is a government incentive to invest more in capital assets and make up for the fact that a capital asset is typically useful only for a limited time.
A capital asset model is (or should be) a very reliable and stable set of guidelines using by those dealing primarily in financial capital. While often assumed in complex rules or guidelines for frontline lenders, behind the scenes there is a highly competitive business in creating these and using them to identify risk or opportunities for gain/loss/capital reinvestment. In activity-based costing, assets used for gains and capital reinvestment tend to be well qualified to identify unnecessary assets and malinvestment.
Capital models vary, as do theories of intangibles and their measurement, risk as regret, and also theories of how capital assets are improved, e.g. the open source business model assumes more to gain from mass peer review and wide adoption than by selling source code or controlling changes.
[edit] "Six styles of capital"
However, the most standard or dominant distinctions between different types of capital asset are:
- natural capital which delivers nature's services to humanity without payment and maintain themselves
- infrastructural capital or man-made capital goods that deliver services, but wear down
- financial capital which is a human representation of obligations to each other, and which may be directed into direct savings, investment in capital assets, or consumption
- human capital which is a representation of human inputs to processes, usually measured in financial terms, especially in neoclassical economics - see value of life; this is the most complex and is often broken down into subtypes, as per the six styles of capital:
- individual capital or persons with talent that is uniquely theirs and dies with them
- social capital = goodwill, trust or duty bonds between people that often substitutes for financial payment, e.g. free software and open content exploit this, trademarks protect it
- instructional capital = the non-living, non-emotional, non-personal instructions, including code and law and patents and ontology, that humans consult when working to avoid errors or gain confidence
See body/bond/bits, six styles of capital and term:intellectual property for more on why human capital should be divided in this way.
[edit] representation in living ontology
Some core living ontology patterns assume this 'six style' model of capital:
indirectly:
- gain/loss/capital (more capital recognized)
- assure/insure/ensure (different compensations)
[edit] valuation
Any capital asset that is valued and measured and sold in a major market can be tracked.
"The world's financial system is overflowing with stocks, bonds and other financial assets -- $140 trillion worth," according to "McKinsey & Co. that maps financial assets around the globe and seeks to track the flows of these assets as they move from one region to another, putting hard numbers on the oceans of capital washing up around the globe."
"At $140 trillion in 2005, the value of the world's financial assets hit a new peak and was more than three times as large as the total output of goods and services produced across the planet that year...investors and the banks that manage their money are spreading their bets more broadly. Flows of investment across borders hit $6 trillion in 2005, McKinsey said, above levels reached at the height of the 1990s stock-market bubble and more than double the figure in 2002."
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The U.S. "takes in about 85% of the flows from countries that are net exporters of capital -- places like Japan, China and the Middle East." Diana Farrell of McKinsey says, "Of all the savings that citizens world-wide are willing to put outside their countries, the U.S. gets 85% of it." Most likely because it has the world's most effective system of valuing and packaging financial instruments, some of which have little or no real assets "underlying" them.
[edit] UN system of national accounts
The World Bank as of 2011 was reforming the UN system of national accounts to recognize natural capital and some aspects of human capital more fully, i.e. make financial/infrastructural/natural distinctions over 2014-2020. See also triple bottom line, BIS, IMF, WTO, Bretton Woods and (most importantly) TEEB.
These global changes would alter power balances by recognizing trillions of dollars in liabilities created by current practices in mining, oil, coal, fishing, forestry, etc.. Global winners likely to include South Korea, Germany, Spain and Ecuador, and losers Russia and (worst) Canada - which based their economies and most of their finance sector and industrial policy on resource extraction. Notably both export energy.
While it's unlikely that the individual/social/instructional distinctions would become global monetary policy, they would remain useful ways for nation-states to better manage their currencies for advantage. Reforms of this nature may happen 2020-2030.
