Measuring the Value Of Information - An Asset Valuation Approach.

Abstract

Information is increasingly being recognised as one of the firm's most valuable assets. However so far it has resisted quantitative measurement. While it consumes vast and ever increasing quantities of organisational resources in its capture, storage and processing, it typically receives no financial recognition on the balance sheet. The objective of this paper is to develop an approach to valuing information which is both practical to apply and consistent with accepted accounting principles. It begins by examining the nature of information as an asset, and defines a number of laws that govern its behaviour as an economic good. It then looks at alternative asset valuation models from accounting theory and how they may be applied to measure the value of information. Finally, an approach is proposed which adapts existing asset valuation methods to reflect the unique characteristics of information as an asset. Measures of the value of information may be used to measure IT effectiveness , increase organisational awareness of the value of information, guide IT strategic planning and cost-justify DSS/EIS developments.