THE ROLE OF INTANGIBLE ASSETS IN A COMPANY'S MARKET VALUE CREATION

The traditional approaches to evaluation of a company's value are based on using of historical accounting information and forecasted market estimations. The accounting system does not register any value created in contrast to the investments made into R&D, innovations, and human capital, which are fully expensed. This is the major reason for the growing disconnection between market value and financial information. In actual economic situation managers of companies understand that the key sources for value creation are intangible assets. In economic literature intangible assets are defined as "intellectual capital". The calculation of the company's value based on evaluation of intellectual capital allows to expecting return on investment in R&D, employee training, information technology, brand enhancement, and other intangibles. The given evaluation is very important for the investors and creditors, because the decisions that made on the basic of intellectual capital allow them to make more accurate prediction in income and profit of a company in the future. The aim of the paper is to apply various approaches to defining the market value of the big Latvian company, thus identifying and emphasizing a unique role played intangible assets in its market value creation. The research was performed for the listed Latvian pharmacy company JSC 'Olainfarm'. The results of the paper prove that intangible assets or intellectual capital are an integral component of the market value of a company, and describe the methodology of calculation of intangible value adapted to the investigated company.