Currently, there is a lack of practice standards and guidelines for valuing data and how it is used. But it’s a void that CPAs would be in a prime position to fill.
A few decades ago, when the economy revolved largely around tangible goods and social media was unheard of, it was hard to imagine that anyone would have thought of putting a price tag on something as esoteric as a piece of data. Yet that doesn’t seem so strange anymore, in a world where intangibles rule, and where personal data can drive big dollars for tech giants, among others.
But although the data, which is known to be collected by tech companies for targeted advertising purposes, is known to be valuable, the exact value is subject to some debate. According to Michel Girard, an analytics expert and senior fellow with the Waterloo-based Centre for International Governance Innovation, (data) estimates currently range from approximately US$5 per month to US$20 a month. “It could be more, depending on the type of data collected,” he says.
Girard notes that in a study by Wibson, a blockchain-based decentralized marketplace that claims to empower individuals to monetize their data, the value of personal data collected by big tech companies for digital advertising purposes was estimated to be at least US$240 per year per person. But how are such estimates reached? While Wibson includes its methodology on its website, it is only one method.
A NATIONAL STANDARD
Currently, there is a lack of standards for governing and valuing data. Yet this is a void that CPAs would be in a good position to fill. As CPA Canada CEO Joy Thomas points out in the January 2020 issue of Pivot, “CPAs have long been versed in ensuring that value is measured consistently and that standards are adhered to…. We now need to understand how digital information flows into companies, how to value that data, and how to leverage those insights to deliver value for our employers and clients.”
Girard has a similar take. As he points out in his research, “The time is right for [the CPA profession] to develop [standards of practice] to frame data valuation, [set guidelines on how data is used] and allow CPAs to incorporate data assets in financial statements.”
Girard’s recommendation—one of several relating to standards for data governance–is a direct response to The Way Forward, a report published as part of CPA Canada’s ambitious consultation initiative to help define the future of the accounting profession. Foresight: Reimagining the Profession aims not only to anticipate the future, but also to develop strategies that will help the profession adapt to the disruptive changes heading its way. Girard himself is a consultant for the data governance workstream.
A STARTING POINT
Given the current lack of common touchpoints, where would you start to develop a valuation standard? As Girard points out, some research, models and best practices already exist and are being developed:
Statistics Canada recently published a study called The value of data in Canada: experimental estimates. According to Girard, the paper is “probably detailed enough to allow for the creation of an initial data valuation CPA standard.”
Gartner published a report in 2015 entitled Why and how to measure the value of your information assets. The approach is based on different information valuation methods— what it calls foundational and financial measures. Then in 2017, it came out with Treating information as an asset, among other publications.
Venture capital firms have also developed methodologies to assess the value of firms involved in producing of intangible assets.
The U.S. government, among others, has begun to look into the importance of establishing standards for assessing the value of data gathered by big tech organizations. For example, Congress recently introduced the Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data Act (DASHBOARD).
TAKING THE LEAD
As time goes on, it’s likely that more research will emerge on data valuation. But as The Way Forward and Girard’s research show, there is already a need for foundational standards of practice around all aspects of data governance and the data value chain. And this need will only become more pressing, given that the intangible economy is expected to grow by leaps and bounds in the coming years.
It’s with a keen sense of these realities that the profession is making data governance one of the key focus areas as it moves into the second phase of Foresight.
CPA Canada is already involved with the Data Governance Standardization Collaborative, a group of Canadian organizations that are currently developing standards around data. To continue this process, Girard says , “the accounting profession needs to…design a consultation strategy so that CPAs can begin the granular work of supporting standards, gaining experience in an emergent discipline, and, finally, establishing themselves as authorities.”
Naturally, considerable work remains; but CPAs are in a prime position to complete it.
Read the full article by Margaret Craig-Bourdin on CPA Canada’s website.