Evaluating a firm's merit on the basis of its financial history alone is not enough to determine its potential.An increasing number of financial institutions are focusing attention on "knowledge asset management reports" when considering the value of a firm. Why are "intangibles" and "knowledge assets" of a firm attracting more and more attention? This is exactly what this paper examines in order to establish the importance of "knowledge asset management" in developing potentialities of a firm. As a matter of fact, the "knowledge assets" concept is becoming more popular than the accounting concept of "intangibles" in business. This study inquires into the origins of the "knowledge assets" concept, making clear the logical distinction between the two categories. Furthermore, the significance of successful "knowledge asset management" based on an accurate understanding and proper use of "knowledge assets" will be considered, together with a prospect of development of the "knowledge assets" concept in Japan.