Question

Every five​ years, the Bureau of Economic Analysis​ (BEA) revises past GDP figures and the methodology involved in computing national income. In June​ 2013, the BEA decided to increase the weighting given to the creation of intellectual property in the national income accounts. This means that the intellectual property involved in the creation of​ books, movies,​ photographs, and even greeting cards will be included in GDP.​ Moreover, the initial cost of producing intellectual property will be treated as a capital investment and future flows of revenue from the book or TV show will be added later on. What are the possible difficulties that the BEA could face with this new​ approach?

Answer 1

Answer:

E) A and B only.

• A. Identifying the qualifying expenditures that lead to the creation of the intellectual property.
• B.  Deciding how broadly or narrowly to define the concept of intellectual property.

Explanation:

The problem with valuating intellectual property is not what the intellectual property is worth once it is completed (e.g. patent), the real challenge is to properly identify the costs of developing the intellectual property. Research and development costs are usually reported as expenses for this same reason.

Another problem is to really define what can be considered intellectual property and specially what intellectual property should be assigned value. A trademark is an intellectual property, but most trademarks are really worthless, but some like Apple or Coca Cola are worth millions.