Disclosure of non‐financial information in the annual report A management‐team perspective

Disclosure of non‐financial information in the annual report A management‐team perspective Purpose – The purpose of this paper is to analyse the management teams' views regarding different aspects related to the disclosure of non‐financial information in the annual report. The focus is on the following aspects: incentive, quantity, focus, use of non‐financial key performance indicators (KPIs) and trends. Design/methodology/approach – The data are based on a comprehensive questionnaire survey addressed to investor‐relation managers (IRMs) at the largest companies listed on the Stockholm Stock Exchange. Findings – The study confirms an increasing focus of non‐financial information related to intangible assets in corporate disclosure. This increase appears to be both regulatory and demand driven. Encouraging indeed is that management teams seem to have acknowledged the importance not only to describe the less tangible values per se , but also to explain the roles they play in the value‐creation process and in corporate strategy. Furthermore, the study reveals a trend shift from research and development (R&D) and relational information towards corporate social responsibility (CSR) and employee‐related information, an increasing number of non‐financial KPIs and a positive attitude to mandatory requirements. Overall, the findings indicate that voluntary disclosure compensates for the deficiencies of financial statements to properly disclose intangible assets. This may lessen the risk of the argued impairment of the efficient allocation of resources on the stock market. Practical implications – The findings reveal that quite a few challenges lie ahead in shaping efficient corporate disclosures where also intangible assets are in focus. The most critically relate to dealing with the concerns of reliability and comparability associated with disclosures of intangible assets and their related non‐financial KPIs. This needs to be taken on promptly by management teams, policy makers and financial market regulators if the corporate‐disclosure process shall function efficiently and facilitate decreased information asymmetry and uphold an efficient allocation of resources on the stock market. Originality/value – Herein not only one aspect related to disclosure of non‐financial information is being analysed, but also several and from a management‐team perspective, which is a perspective often neglected for the sophisticated‐user perspective. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Intellectual Capital Emerald Publishing

Disclosure of non‐financial information in the annual report A management‐team perspective

Journal of Intellectual Capital, Volume 12 (2): 24 – Apr 19, 2011

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1469-1930
DOI
10.1108/14691931111123421
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to analyse the management teams' views regarding different aspects related to the disclosure of non‐financial information in the annual report. The focus is on the following aspects: incentive, quantity, focus, use of non‐financial key performance indicators (KPIs) and trends. Design/methodology/approach – The data are based on a comprehensive questionnaire survey addressed to investor‐relation managers (IRMs) at the largest companies listed on the Stockholm Stock Exchange. Findings – The study confirms an increasing focus of non‐financial information related to intangible assets in corporate disclosure. This increase appears to be both regulatory and demand driven. Encouraging indeed is that management teams seem to have acknowledged the importance not only to describe the less tangible values per se , but also to explain the roles they play in the value‐creation process and in corporate strategy. Furthermore, the study reveals a trend shift from research and development (R&D) and relational information towards corporate social responsibility (CSR) and employee‐related information, an increasing number of non‐financial KPIs and a positive attitude to mandatory requirements. Overall, the findings indicate that voluntary disclosure compensates for the deficiencies of financial statements to properly disclose intangible assets. This may lessen the risk of the argued impairment of the efficient allocation of resources on the stock market. Practical implications – The findings reveal that quite a few challenges lie ahead in shaping efficient corporate disclosures where also intangible assets are in focus. The most critically relate to dealing with the concerns of reliability and comparability associated with disclosures of intangible assets and their related non‐financial KPIs. This needs to be taken on promptly by management teams, policy makers and financial market regulators if the corporate‐disclosure process shall function efficiently and facilitate decreased information asymmetry and uphold an efficient allocation of resources on the stock market. Originality/value – Herein not only one aspect related to disclosure of non‐financial information is being analysed, but also several and from a management‐team perspective, which is a perspective often neglected for the sophisticated‐user perspective.

Journal

Journal of Intellectual CapitalEmerald Publishing

Published: Apr 19, 2011

Keywords: Intangible assets; Intellectual Assets; Non‐financial information; Disclosure; Annual report

References

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