Intellectual Capital Reporting At The Crossroads

Madan Bhasin

Paradigm, 2008, vol. 12, issue 1, 64-76

Abstract: Intellectual capital (IC) is an important value driver in today's organization. Although IC reporting is receiving increasing attention from accountants in recent years, the innovativeness of the concept impedes IC from being fully incorporated in financial accounting reports as yet. At present, disclosure of IC-related information by companies is done on a voluntary basis, as applicable accounting regulations dictate the definition of a balance sheet and the assets to be included therein. Omission of IC-related information may adversely influence the decisions made by shareholders or lead to material misstatements. Only when companies provide IC statements on a large scale, we would be able to speak of a true reporting revolution in company valuation, both in theory and in practice. This paper attempts to review some prominent internal and external measurement methods of IC. There is a tremendous need for standardization and harmonization across companies and across national boundaries in the field of IC reporting. A solid theoretical base should be achieved at the earliest in order to advance in the field, and future research should focus on the development of IC guidelines as well as their international harmonization. Additionally, researchers should analyse IC reports published by pioneer firms, from around the world, to gather the best learning experiences. With this international insight, firms could be advised on how to introduce a new dimension in transparency that will strengthen its organizational governance. After more than a decade, the IC movement is still growing and more and more organizations are recognizing IC as the essence of business navigation.

Keywords: Intellectual Capital (IC); financial accounting; company valuation; international harmonization (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:sae:padigm:v:12:y:2008:i:1:p:64-76

DOI: 10.1177/0971890720080109

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