Premium Essay

Intellectual Capital Disclosure

In: Business and Management

Submitted By discoversunny
Words 14662
Pages 59
Intellectual Capital Disclosure Practices and Effects on the Cost of Equity Capital: UK Evidence
Researchers: Musa Mangena Richard Pike Jing Li

Intellectual Capital Disclosure Practices and Effects on the Cost of Equity Capital: UK Evidence

by Musa Mangena Richard Pike Jing Li University of Bradford

Published by The Institute of Chartered Accountants of Scotland CA House, 21 Haymarket Yards Edinburgh EH12 5BH

First Published 2010 The Institute of Chartered Accountants of Scotland

© 2010 ISBN 978-1 904574-14-9 EAN 9781904574149

This book is published for the Research Committee of The Institute of Chartered Accountants of Scotland. The views expressed in this report are those of the authors and do not necessarily represent the views of the Council of the Institute or the Research Committee. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or publisher. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopy, recording or otherwise, without prior permission of the publisher.

Printed and bound in Great Britain by T. J. International Ltd.



Foreword ...................................................................................... i Acknowledgements ........................................................................ iii Executive Summary ...................................................................... v

IntroductIon and aIms of the study ............................................. Introduction ........................................................................................ Aims of the study...

Similar Documents

Free Essay

Literature Review Comparative Analysis of Information Disclosure of Intellectual Capital in the Uk and China

... The primary purpose of this essay is to comparatively analyze information disclosure of intellectual capital in the UK and China, using the content analysis method on company annual reports. In contemporary society, the importance of intellectual capital (IC) and the popularity of using IC to value a company’s competitiveness have been increasing. The definition offered by the Chartered Institute of Management Accountants (2001) is probably one of the most comprehensive definitions: “…the possession of knowledge and experience, professional knowledge and skill, good relationships and technological capacities, which when applied will give organizations competitive advantage.” Predicting a company’s future market performance is one of the key functions of IC information disclosure (Roslender and Fincham, 2004). Consequently, IC will have a significant role in the future value creation process. This study has some limitations, such as the small sample number, which has implications for how representative the data are. Ten companies in the respective stock markets were selected in the UK and China (total twenty) and content analysis was performed. A larger sample would have made the calculations too complex for the time available. The following paper reports the results of empirical research indicating that the trend of IC information disclosure is steadily increasing in both China and the UK, indicating that British companies had a better......

Words: 2711 - Pages: 11

Premium Essay


...Development of human resource in terms of mentality and intellectual capital is one of aimed areas under Ninth Malaysia Plan in Malaysia. To enhance the core competence, Malaysia has to convert from labor-intensive goods production to utilization of human knowledge and skills. Research by Tan (2000) found that only few companies listed in Bursa Malaysia reports intangible assets and a small percent of total assets of these companies disclosed intangibles other than goodwill. Thereby, it is aimed to enhance that Malaysian companies should voluntarily disclose intellectual capital in their financial statements. This research measures to the scope length of intellectual capital disclosure and the connection between intellectual capital and corporate governance variables among Malaysian listed companies after the revision of Malaysian Corporate Code of Governance on 2007.Key amendments emphasized to the Code are based on fortifying board of directors and audit committee functions, qualification criteria for appointment, boards composition, frequency of meetings and necessity for continuos training. The code requirements enables shareholders to assess the annual report more transparently. Intellectual Capital DIsclosure Intellectual capital are intangible assets that provides value to a firm`s core competence and it consists of three components namely, tacit knowledge and innovativeness of employees, infrastructure of human capital and external relationship of the firm. It is......

Words: 1299 - Pages: 6

Premium Essay


...available at Intellectual capital disclosure and intangible value drivers: an empirical study Philip Vergauwen Faculty of Applied Economic Sciences, Universiteit Hasselt, Hasselt, Belgium ICDs and intangible value drivers 1163 Received February 2007 Revised May 2007 Accepted May 2007 Laury Bollen Faculty of Economics and Business Administration, Department of Accounting and Information Management, Universiteit Maastricht, Maastricht, The Netherlands, and Els Oirbans PriceWaterhouseCoopers, Eindhoven, The Netherlands Abstract Purpose – This paper aims to study the relationship between intellectual capital disclosures (ICDs) and the relative importance of intangible assets as company value drivers. Design/methodology/approach – Annual reports of Swedish, British and Danish firms are analysed to measure the extent of ICD. The level of intellectual capital (IC) in firms, measured with proxies for the categories of human, structural and relational capital. Findings – As to the components of IC, the empirical results indicate that there is a strong significant positive relationship between (the level of) structural capital possession of a firm and the firm’s ICD. Practical implications – This suggests that firms with a relatively high level of structural capital, disclose more information on IC in the annual report. The study found no such significant association between human and relational capital in firms and ICD regarding these......

Words: 8529 - Pages: 35

Premium Essay

Intellectual Capital report intellectual capital Summary In today’s knowledge economy, intellectual capital has been playing an increasingly significant role in creating corporate sustainable competitive advantages and becomes instrumental in determining the enterprise value. Though measuring the value of intellectual capital is difficult, with the emerging of intellectual capital valuation models, a number of leading companies have decided to make additional intellectual capital disclosure. This paper discusses and illustrates the intellectual capital statement. How to effectively measure and disclose intellectual capital in external financial reporting and how the accounting rules for reporting intangibles limit the recognition of intellectual capital and will also be discussed. The final part is proposed approaches to intellectual capital reporting. Introduction Our world is in the rise of new economy, principally driven by the information and knowledge. Today, a number of companies and organizations rely heavily on the knowledge and skills of their stuff and the network of the customer. As these intangible assets became increasingly critical, the limitations on financial statements in explaining a company’s value stress the fact that the source of economic value is no longer the production of material goods but the creation of intellectual capital. Background Definition Stewart first defined intellectual capital as intellectual material-knowledge, information, intellectual property,...

Words: 1937 - Pages: 8

Free Essay


...of knowledge and social forces in economic processes in the ‘market for information’. John Holland, University of Glasgow, Jo Danbolt, University of Edinburgh, Lei Chen, University of Keele. John Holland, University of Glasgow, The Adam Smith Business School, University of Glasgow, Main Building, Glasgow, G12 8QQ, Scotland Abstract: This paper develops a model of the information intermediation role of analysts in the ‘market for information’ (MFI). It illustrates how the same type of ‘soft’ intangibles information changes as it progresses through analyst information intermediation processes. The latter concern: company disclosure; analyst acquisition and analysis of company information; analyst reporting processes; and market impacts. The common information concerns ‘soft’ or qualitative information about the company intellectual capital (IC) or intangibles in the company business model. Banks and bank analysts are used as examples. Knowledge, social and economic factors in the wider ‘market for information’ (MFI) are shown to be major influences on ‘soft information’ and how it changes in analyst information intermediation processes. Negative knowledge and social factors play a role in weakening and eventually destabilising economic processes in analyst and the MFI. They were important factors in creating knowledge and information problems in analysts and the MFI, both ongoing, and during the crisis of 2007-09. These factors are also part of a solution to the......

Words: 28563 - Pages: 115

Premium Essay

Kellogg's Indian Expereince

... SUBJECT: TERM PAPER HUMAN CAPITAL TABLE OF CONTENT 1. INTRODUCTION 1 2. INTELLECTUAL CAPITAL 2 2.1 Definition of Intellectual Capital 2 2.2Characteristics of Intellectual Capital 2 2.3 Components of intellectual capital 3 2.3.1 Human Capital 3 2.3.2 Structural Capital 3 2.3.3 Relational External Capital 5 3. MANAGING INTELLECTUAL CAPITAL 7 3.1 Tacit knowledge 8 3.2 Explicit knowledge 8 4. MEASURING INTELLECTUAL CAPITAL 12 4.1 Why should Intellectual Capital be measured? 12 4.2 Why is intellectual capitalso hard to measure? 12 4.3 Methods for measuring intellectual capital 13 5. INTELLECTUAL CAPITAL REPORTING FRAMEWORKS 14 5.1 Balanced Scorecard 14 5.2 Intangible Assets Monitor (IAM) 14 5.3 Skandia Value Scheme (SVS) 15 5.4 Challenges in reporting intellectual capital 15 5.5 Challenges in disclosure of intellectual capital 16 6. VALUATION OF INTELLECTUAL CAPITAL 17 6.1 Value added approach 17 6.2 Value creation index 18 6.3 Valuation models 20 6.3.1 Traditional valuation models 20 6.3.2 Static valuation models 21 6.3.3 Dynamic valuation models 21 6.3.4 Real option models (ROM) 22 7. CONCLUSION 23 INTRODUCTION Capital, in the business context, refers to any asset that will......

Words: 7066 - Pages: 29

Premium Essay

Hr in India

...adequately reviewed and objectively criticized so that more comprehensive could be developed. The study revealed that the conceptualization of HRA, the ideas incorporated therein, and arguments are good for the accounting profession and corporate financial reporting. But the existing models yet proposed are not in a state to implement HRA practice worldwide. Hence this paper proposes a solution in line with existing framework of accounting that could be adopted by the standard setters. The study, however, recommends that more interest should be accorded to the concept of HRA in order to stimulate more comprehensive researches aimed at simplifying the concept and boosting its applicability. Key Words: Human Resource Accounting (HRA), Human Capital, Intellectual...

Words: 5870 - Pages: 24

Premium Essay

Hr in India

...adequately reviewed and objectively criticized so that more comprehensive could be developed. The study revealed that the conceptualization of HRA, the ideas incorporated therein, and arguments are good for the accounting profession and corporate financial reporting. But the existing models yet proposed are not in a state to implement HRA practice worldwide. Hence this paper proposes a solution in line with existing framework of accounting that could be adopted by the standard setters. The study, however, recommends that more interest should be accorded to the concept of HRA in order to stimulate more comprehensive researches aimed at simplifying the concept and boosting its applicability. Key Words: Human Resource Accounting (HRA), Human Capital, Intellectual...

Words: 5870 - Pages: 24

Premium Essay

Intangible Assets

...EVALUATION OF THE DISCLOSURES OF SELECTED COMPANIES 5 Disclosures on Intangible Assets 5 Compliance with AASB 138, Paragraphs 118 to 123 and 126 to 128 6 Differences in Disclosures Between the Two Companies 7 RECOMMENDATIONS 9 LIST OF REFERENCES 10 APPENDICES 11 Appendix A – Cervantes Corporation Ltd. – Consolidated Statement of Financial Position 11 Appendix B – Cervantes Corporation Ltd. – Note 1 (i) 11 Appendix C – Cervantes Corporation Ltd. – Note 13 12 Appendix D – Clean Seas Tuna Limited – Consolidated Statement of Financial Position 12 Appendix E – Clean Seas Tuna Limited – Note 1 (e) 13 Appendix F – Clean Seas Tuna Limited – Note 18, part 1 13 Appendix G – Clean Seas Tuna Limited – Note 18, part 2 14 Appendix H – Clean Seas Tuna Limited – Note 18, part 3 15 Appendix I – Clean Seas Tuna Limited – Note 18, part 4 15 EXECUTIVE SUMMARY This research-based case study and report aims to review the disclosure requirements for intangible assets in an attempt to improve the quality of financial reporting. The study was based on the comparison of the disclosures for the intangible assets of two Australian Securities Exchange listed companies from the same industry, using their latest annual reports. The selected companies are Cervantes Corporation Ltd. and Clean Seas Tuna Limited, both participating in the aquaculture industry. The comparison was done by evaluating individual Notes to the Financial Statements as of June 30, 2012, noting all the disclosures......

Words: 2395 - Pages: 10

Free Essay

Human Resource Accounting

...HUMAN RESOURCE COSTING AND ACCOUNTING VERSUS THE BALANCED SCORECARD: A LITERATURE SURVEY OF EXPERIENCE WITH THE CONCEPTS1 Ulf Johanson, Gunilla Eklöv, Mikael Holmgren, Maria Mårtensson2 6FKRRO RI %XVLQHVV 6WRFNKROP 8QLYHUVLW\  à Uurà ƒ…r†r‡Ã ƒ…‚wrp‡Ã v†Ã ‚rà ‚sà †r‰r…hyà †ˆiƒ…‚wrp‡†Ã vÃ ‡urà H@SDUVHà Hrh†ˆ…vtà D‡htviyr†Ã ‡‚à Vqr…†‡hqà hq D€ƒ…‚‰rÃD‚‰h‡v‚Ã Hhhtr€r‡à ƒ…‚wrp‡à Uurà hv€Ã ‚sà ‡urà H@SDUVHà ƒ…‚wrp‡Ã v†Ã ‡‚à v‰r†‡vth‡rà ƒ‚††vivyv‡vr†Ã ‡‚à €rh†ˆ…r hqà …rƒ‚…‡Ã v‡htviyr†à 6‡Ã ‡urà ƒ…r†r‡Ã ‡v€rà vrà ˆv‰r…†v‡vr†Ã hqà …r†rh…puà v†‡v‡ˆ‡r†Ã vÃ †v‘à @ˆ…‚ƒrhÃ p‚ˆ‡…vr† 9r€h…xÃAvyhqà A…hprà I‚…h’à TƒhvÃ hqà Trqrà h…rà ƒh…‡vpvƒh‡vtà vÃ ‡urà ƒ…‚wrp‡à 6ƒh…‡Ã s…‚€Ã svhpvhyà †ˆƒƒ‚…‡ s…‚€Ã‡urÃ@ˆ…‚ƒrhÃ8‚€€v††v‚Ãsˆqvt†Ã‚sÇurÃTrqv†uƇˆqvr†Ãh…rÂi‡hvrqÃs…‚€Ã‡urÃP@89ÇurÃTrqv†uÃ8‚ˆpvyÃs‚… X‚…xÃGvsrÃSr†rh…puÃIˆ‡rxÇurÃTrqv†uÃHvv†‡…’ÂsÃU…hqrÃhqÃDqˆ†‡…’ÃhqÇurÃTrqv†uÃQˆiyvpÃSryh‡v‚†Ã6††‚pvh‡v‚ 6Ãs‚…€r…Ér…†v‚Ã‚sÇuv†Ãƒhƒr…Ðh†Ãqryv‰r…rqǂÇurÃP@89ÃvÃ (('  ÃUurÃhˆ‡u‚…†Ãh‡Ã‡‚ÇuhxÃGr†ÃTuhƒ†ÃhqÃHh‡‡vÃTx‚‚tÃs‚…Ævtvsvph‡Ãp‚‡…viˆ‡v‚†Ã‡‚ÇurÅr†r‡Ãƒhƒr… +XPDQ 5HVRXUFH &RVWLQJ DQG $FFRXQWLQJ YV WKH %DODQFHG 6FRUHFDUG $%675$&7 In the present paper conclusions are drawn from literature whose goal was to put information on intangibles into financial and non-financial frameworks. The analysis primarily focuses on two concepts: The human resource management oriented concept called......

Words: 31497 - Pages: 126

Premium Essay

It Strategy

...Executing IP Strategy with ICM Process Implementation By Bruce Story, Senior Advisor, ipCapital Group Introduction: Background from Dow While leading Intellectual Capital Management (ICM) in the Plastics Business at The Dow Chemical Company, I witnessed the value of having a business-aligned IP strategy, implemented early in the development of a new technology platform. The difference between leaving IP development to the ad hoc process dependent on the initiative of the inventor and using IP strategy to guide R&D and new business development can be immense. The high performance elastomers business platform developed at Dow in the last decade is worth over a billion dollars. With the increasingly global competitive environment, this never would have been sustained without the implementation of an IP strategy that took into account the business strategy, competitors’ patenting strategies, the product value chain, and providing a closecoupling of actionable IP strategy to the R&D staff. Previously, as is common in many companies, the IP strategy was basically a legal strategy for obtaining patents. Dow’s attorneys were very good at getting patents granted. However, the disclosing of inventions was left to the initiative of the inventors who were often too busy with their projects to document their inventions. The “Inventor-of-the–Year” Award went to the inventor who received the most U.S. patents in the previous year. Quantity was being rewarded rather than IP...

Words: 6095 - Pages: 25

Premium Essay

Hr Accounting

...Journal of International Business and Cultural Studies Human resource accounting and international developments: implications for measurement of human capital Maria L. Bullen Clayton State University Kel-Ann Eyler Wesleyan College Abstract Human Resource Accounting (HRA) involves accounting for expenditures related to human resources as assets as opposed to traditional accounting which treats these costs as expenses that reduce profit. Interest and contributions to growth in HRA have been evident in a number of countries. The strong growth of international financial reporting standards (IFRS) is an indication that the environment for international financial accounting is one that potentially encourages the consideration of alternative measurement and reporting standards and lends support to the possibility that future financial reports may include nontraditional measurements such as the value of human resources using HRA methods. Keywords: Human Resource Accounting, Human Capital, Intellectual Capital, International Accounting, International Financial Reporting, International Financial Reporting Standards Human Resource Accounting, Page 1 Journal of International Business and Cultural Studies Introduction Human Resource Accounting (HRA) involves accounting for the company’s management and employees as human capital that provides future benefits. In the HRA approach, expenditures related to human resources are reported as assets on the balance sheet as opposed to......

Words: 8132 - Pages: 33

Premium Essay

Business Law

...article from Monroe Moxness Berg website. When start a new business, there are many areas where legal planning can save time and money in both the short and the long run. So this article tries to analysis these areas from four aspects: Corporate Structure, Trademarks and Other Intellectual Property, Non-Disclosure and Non-Compete Agreements and Exit Planning, so that help business owners create a legal structure that will maximize the value of their investment of capital and effort. The content about selecting a proper legal entity and organization relates to the unit 8 Business organizations. This part in this article analyses different business organizations, such as sole proprietorship, limited liability company and corporation, to find that proper legal entity selection and organization can, among other things, limit the legal liability of the owners, facilitate tax savings, streamline accounting, and facilitate eventual sale of the company, whether to insiders or third parties. So this part takes advantages of the knowledge of different business organizations which we will learn in unit 8. The content about trademarks and other intellectual property relates to the Chapter 8 intellectual property and internet law. This part in this article analyses the importances of using trademark and copyright which could take advantages of the relative content in chapter 8. Starting a new business is demanding. A variety of challenges, such as sales, marketing,......

Words: 379 - Pages: 2

Free Essay

Justification of Protection of Intellectual Property Vis-a-Vis Trade Secrets

...Justification of Protection of Intellectual Property vis-a-vis Trade Secrets PAPER V Submitted By: SARTHAK KAPILA ROLL NO. 48, P.G.D.,I.P.R. – 2014 Justification of Protection of Intellectual Property vis-a-vis Trade Secrets Intellectual property pertains to any original creation of human intellect such as artistic, literally, technical or scientific creation. Intellectual Property Rights (IPR) refers to the legal rights given by the State to the inventor/creator to protect his invention/creation for a certain period of time. These legal rights confer an exclusive right to the inventor/creator or his assignee to fully utilize his invention/creation for a given period of time. Countries have laws to protect intellectual property for two main reasons. One is to give statutory expression to the moral and economic rights of creators in their creations and the rights of the public in access to those creations. The second is to promote, as a deliberate act of Government policy, creativity and the dissemination and application of its results and to encourage fair trading which would contribute to economic and social development. The term ‘Intellectual Property’, denotes rights over intangible object of the person whose mental effort created it and refers to a loose cluster of legal doctrines that regulate the uses of different sorts of ideas and insignias. The subject matter of intellectual property is very wide and includes literary and artistic works, films,......

Words: 8264 - Pages: 34

Premium Essay

The Relevance/Irrelevance Issue

...basic reasons. The numbers: (1) are not isomorphic with capital market values, (2) do not have a future orientation, and (3) are un-interpretable since they are based upon five different measurement attributes. The lack of isomorphism argument is invalid since actual current performance is not identical with the capital market expectations of future performance. The lack of a future orientation argument is invalid since financial statements capture what has happened and not what is expected to happen. Since a single measurement attribute is required to produce meaningful measures, the un-interpretability argument holds. A unique measurement attribute is identified in this paper to address this problem I. INTRODUCTION In Statement of Financial Accounting Concepts No. 1: Objectives of Financial Reporting by Business Enterprises (SFAC1) [1978], the Financial Accounting Standards Board (FASB) maintains that the function of financial accounting is to generate information useful to a group of users (investors and creditors) for decision-making. The focus on that specific function (decision-making) leads to a concern for predictive value, as opposed to feedback value, in financial statements. This focus has questioned the relevance of the information contained in financial statements for investors’ prediction of the securities market values/stock prices and has ushered in and perpetuated a line of research that views capital market valuation as the basis for determining the......

Words: 15491 - Pages: 62