The importance of intellectual capital reporting: evidence and implications

The importance of intellectual capital reporting: evidence and implications Purpose – This paper has two purposes: to identify and explain the major forces that are causing the increasing need for operational reporting and intellectual capital (IC) reporting for European companies; and to identify the necessary and sufficient conditions for operational and intellectual capital reporting if such reporting is to be meaningful for information users. Design/methodology/approach – The approach for this paper has been to examine relevant papers, reports, guidelines, compendiums, annual reports, opinions, submissions and legislation. Findings – Eight determining forces are identified that make the basis of the case for the provision of operating and IC information: the long‐standing global dominance and growth of the US economy; the emergence of business models other than the value chain (especially the emergence of network businesses); the changing nature of stock exchanges; the influence of different investment fund types (mutual, pension and hedge funds); the roles of buy‐side and sell‐side analysts; global and European investment index development; rating agency activity; and financial reporting and corporate governance regime development. Practical implications – The eight forces are interdependent and immutable. Comprehensive operational and IC reporting are unavoidable. Accordingly, the authors propose that the necessary and sufficient conditions for adequate enterprise information reporting are: a legal requirement for mandatory operational and IC reporting and attendant regulatory framework(s) where the legal framework is based on the concept of neglect; key operating and IC resource status and activity performance definitions and metrics that reflect the enterprise's underlying business model(s); and (3) a mapping of the capitalized operational and IC investments that are by definition normally expensed to the financial report accounts. Originality/value – The authors believe that no one has previously formally proposed a mandatory operational and IC reporting requirement; a legal reference frame of reference based on the legal concept of neglect; standard definitions for operational and IC performance metrics; a reference framework for information quality that is, inter alia , based on the consistency, comparability and comprehensiveness of reported metrics; and the requirement to map all capitalized IC resources back to the financial reports of the company. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Intellectual Capital Emerald Publishing

The importance of intellectual capital reporting: evidence and implications

Journal of Intellectual Capital, Volume 8 (1): 45 – Jan 23, 2007

Loading next page...
 
/lp/emerald-publishing/the-importance-of-intellectual-capital-reporting-evidence-and-rEVkAH0nq0
Publisher
Emerald Publishing
Copyright
Copyright © 2007 Emerald Group Publishing Limited. All rights reserved.
ISSN
1469-1930
DOI
10.1108/14691930710715051
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper has two purposes: to identify and explain the major forces that are causing the increasing need for operational reporting and intellectual capital (IC) reporting for European companies; and to identify the necessary and sufficient conditions for operational and intellectual capital reporting if such reporting is to be meaningful for information users. Design/methodology/approach – The approach for this paper has been to examine relevant papers, reports, guidelines, compendiums, annual reports, opinions, submissions and legislation. Findings – Eight determining forces are identified that make the basis of the case for the provision of operating and IC information: the long‐standing global dominance and growth of the US economy; the emergence of business models other than the value chain (especially the emergence of network businesses); the changing nature of stock exchanges; the influence of different investment fund types (mutual, pension and hedge funds); the roles of buy‐side and sell‐side analysts; global and European investment index development; rating agency activity; and financial reporting and corporate governance regime development. Practical implications – The eight forces are interdependent and immutable. Comprehensive operational and IC reporting are unavoidable. Accordingly, the authors propose that the necessary and sufficient conditions for adequate enterprise information reporting are: a legal requirement for mandatory operational and IC reporting and attendant regulatory framework(s) where the legal framework is based on the concept of neglect; key operating and IC resource status and activity performance definitions and metrics that reflect the enterprise's underlying business model(s); and (3) a mapping of the capitalized operational and IC investments that are by definition normally expensed to the financial report accounts. Originality/value – The authors believe that no one has previously formally proposed a mandatory operational and IC reporting requirement; a legal reference frame of reference based on the legal concept of neglect; standard definitions for operational and IC performance metrics; a reference framework for information quality that is, inter alia , based on the consistency, comparability and comprehensiveness of reported metrics; and the requirement to map all capitalized IC resources back to the financial reports of the company.

Journal

Journal of Intellectual CapitalEmerald Publishing

Published: Jan 23, 2007

Keywords: Financial reporting; Intellectual capital; Shareholder value analysis

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off