Intellectual Capital Reporting: A Cross-Country Study
Abstract
‘Knowledge’ being the new engine of corporate development has become one of the great clichés of recent years. Knowledge, innovation, information-technology, and people are the key contributories in the future of any organization, and IC is the driver of market value in the knowledge economy. Intangibles and how they contribute to value creation have to be appreciated so that the appropriate decisions can be made to protect and enhance them. There must also be a credible way of reporting those intangibles to the market to give the investors comprehensive information to assist in valuing the company more accurately. At present, reporting of IC information across the globe is done by very few leading companies, purely on a ‘voluntary’ basis. Unfortunately, the omission of IC information may adversely influence the quality of decisions made by shareholders, or lead to material misstatements. This study attempts to provide an insight into the style of IC reporting done by the top IT-sector corporations from ‘India’ and ‘Australia’. In order to survey the recent IC reporting practices, we conducted a ‘comparative’ study of 16 Indian and 20 Australian companies in which the “content analysis” was performed on their annual reports. The results of this study confirmed that “IC reporting by the companies from India and Australia are found to be low, mostly reported in a narrative form, and IC reporting had not received any preference from the mentors of these corporations.” A major recommendation for corporations is to develop strategic and tactical initiatives that provide for ‘voluntary’ disclosing of IC. These initiatives may initially be used for internal management purposes, but an external stakeholder-focus IC report should be the ultimate long-run goal.