Intellectual Capital (IC) is an important value driver in todays organizations. Although, IC reporting is receiving increasing attention from accountants in recent years, the innovativeness of the concept makes IC not 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, would we be able to speak of a true reporting revolution in company valuationboth in theory and practice. There is a tremendous need for homogenization in the field of Knowledge Management (KM) and IC. First of all a solid theoretical base should be achieved in order to advance in the field. Parallel with this, future research should focus on the development of IC guidelines and their harmonization. Additionally, researchers should analyze IC reports from 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.
The growth in interest surrounding Intellectual Capital (IC) has occurred commensurate with the rise of virtual corporations and a flourishing service
industry. For these businesses, intangible assets are, more than ever, the `core' assets that drive business success in today's challenging business climate. The main problem, however, is that they are difficult to measure due to their very intangibility. The `unreported' intangible assets are on average 5-10 times those of the tangible assets. Like intangible resources, where 1 + 1 = 2, the nature of intellectual capital is such that 1 + 1 could equal 5. Therefore, different combinations will result in much higher value than the sum of individual elements. In the same way, when knowledge is transferred one to another person or organization, the originator has not lost it. There is, in fact, growing criticism that the traditional balance sheet does not take account of those `intangible' factors that largely determine a company's value and its growth prospects. Another difficulty is that of understanding the interaction between the different elements of IC and how they contribute to a firm's financial results, in both the short- and long-term. |
