arbiter
JournalsAccount

Recognizing Noncompete Agreements as Intangible Assets: A Proposal for Capitalizing a Proxy for Human Capital

Nafiz Fahad et al.

Accounting Horizons2026https://doi.org/10.2308/horizons-2025-054article
AJG 3ABDC A
Weight
0.50

Abstract

SYNOPSIS Employees are becoming increasingly essential to high-performing firms in knowledge-based economies; however, their value is typically not recognized as a distinct asset in accounting. We argue that employee noncompete agreements (restraints of trade) may satisfy the definition of an intangible asset as per current standards. Using the New Zealand setting, in which companies must disclose the number of employees earning more than NZ$100,000, we estimate the value of a noncompete asset. Pro forma capitalization significantly improves the return on asset and leverage ratios and reduces the market-to-book ratio. Furthermore, these changes result in accounting numbers that better explain firm value but only for high-intangible firms and those in human capital-intensive industries. Overall, we provide evidence supporting the capitalization of a component of human capital that is likely controlled by the firm. Our research contributes to the long and contentious debate on intangible capitalization. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; M48; E22.

Open via your library →

Cite this paper

https://doi.org/https://doi.org/10.2308/horizons-2025-054

Or copy a formatted citation

@article{nafiz2026,
  title        = {{Recognizing Noncompete Agreements as Intangible Assets: A Proposal for Capitalizing a Proxy for Human Capital}},
  author       = {Nafiz Fahad et al.},
  journal      = {Accounting Horizons},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.2308/horizons-2025-054},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

Recognizing Noncompete Agreements as Intangible Assets: A Proposal for Capitalizing a Proxy for Human Capital

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.