The effect of intellectual capital disclosure on cost of capital: Evidence from technology intensive firms in Indonesia

There has been an increasing interest in intellectual capital due to the shift from the economical aspect into knowledge and information management aspect. Currently, public firms in Indonesia are not required by accounting standards or law to disclose most of their intellectual capital. However, firms may voluntarily choose to disclose such information. This research aims to examine the level of voluntary intellectual capital disclosure and also the effect of intellectual capital disclosure in firms annual report on cost of equity and cost of debt. The sample used is technology- intensive industry listed firms year 2010. It shows that the level of intellectual capital disclosure in firms annual report is relatively still low with an average of 35.77%. It also shows that there is a negative effect between intellectual capital disclosure and cost of equity. However, intellectual capital disclosure does not have significant effect on cost of debt

The market valuation of intellectual capital : a study of the relationship between IC and the market to book ratios of 20 companies of the tourism and leisure sector of the LSE

Through the growing interest on Intellectual capital the last ten years, this work explores relationship between IC and market valuation. This dissertation highlights the Value Added by Intellectual Capital in market prices of 20 companies of the Travel and Leisure sector of the London Stock Exchange from 2005 to 2013. The relation of IC, its components and Market to Book ratios of firms is studied through the VAIC method. Results support the hypothesis than IC is valued by investors despite its non-recognition by accounting standards. Results support recommendations of more disclosure practices and improvement of IC theoretical frameworks

ACCOUNTING AND FINANCIAL REPORTING RECOGNITION OF FIRMS’ HUMAN CAPITAL INVESTMENT: AN EMPIRICAL INVESTIGATION OF FIRMS IN THE FTSE 100 LISTING OF THE LONDON STOCK EXCHANGE

Firms’ spending on their employees is written off as expense to the annual financial statements under the current accounting treatment. This accounting treatment has been debated over decades, since employees are arguably claimed as the true value creators of firms’ intellectual capital. Value creation potential of employees, identified theoretically as human capital has been researched for valuation and measurement for accounting recognition of human capital investment and decision usefulness of financial reporting recognition through mandatory and mostly voluntary disclosure. Research evidence are found under different phenomenon namely; social capital, intellectual capital, human capital, etc. considering, investment, accounting and reporting practices, though on an ad-hoc basis, highlighting the need for a study covering a holistic picture of the accounting and financial reporting recognition of human capital investment. Hence, the research is conducted, addressing the current practice of accounting and financial reporting recognition of firms’ human capital investment, considering both determinants and consequences of the practice utilising a stakeholder approach. The research is undertaken with data collected from annual reports of firms of FTSE 100 listing of London Stock Exchange for five accounting years, (2004-2009) chosen subjected to data availability, analysed using panel data analysis techniques with fixed and random effect estimators coupled with pooled linear regression as an alternative approach. The results of the study indicated a significant variance in the practice implying positive influences on promoting the practice accounting and financial reporting recognition of human capital investment. The results further indicated the requirement of a framework governed by standards and guidelines in promoting the practice accounting and financial reporting recognition of firms’ human capital investment

Intellectual capital reporting and corporate characteristics of public-listed companies in Malaysia.

This study examines the extent and nature of voluntary intellectual capital (IC) disclosure by public-listed companies in Malaysia and how the disclosure may be explained by the economics or other rationale of corporate disclosure. Those intangible assets that are required to be disclosed under the extant accounting standards were specifically excluded from this study. The top 30 and the bottom 30 companies were selected from the list of top 100 largest public-listed companies by market capitalization at the end of 2003. Content analysis was used to measure the extent of voluntary IC disclosure in the 2003 annual reports of the selected companies. This study found that the voluntary disclosure of IC information is generally not extensive among the publiclisted companies in Malaysia and narrative description of their IC attributes is the most often adopted format. The findings suggest that the IC disclosure behaviour of the sample companies may be explained based on both economic and non-economic rationale. Implications of the findings are discussed

The value relevance of IFRS adoption: cross-country comparisons based on harmonization histories, intellectual capital disclosures and the global financial crisis

This study provides comparative findings on the impact of adoption of International Financial Reporting Standards (IFRSs) on the value relevance of reported accounting and non-accounting information in a set of six countries with a British accounting heritage but divergent harmonization paths leading up to IFRS adoption. The countries included in the sample are the United Kingdom, Australia, Hong Kong, Singapore, Malaysia and South Africa. The aim of this study is to advance the accounting value relevance literature through a more comprehensive analysis – including multiple models of the value relevance of primary accounting numbers, the addition in these models of textual disclosures about intellectual capital, longer pre- and post-IFRS adoption periods, and a larger cross-section of countries – than prior studies. This study is motivated in terms of making a contribution to the financial reporting research literature on value relevance and intellectual capital disclosure, as well as providing findings that can be informative to accounting standards setters. The sample for this study consists of 2275 firm-year observations for 325 listed companies, from the six chosen countries, for the period between 2002 and 2008. The results of this study have provided an increased understanding of the level and direction of changes in value relevance of accounting numbers under the IFRS regime compared to alternative countries’ local GAAPs which had varied in degree of harmonization with IFRSs. It then provides insight about the issue of whether off-balance sheet company value contained in intellectual capital, particularly in new economy industries, is weakening the value relevance of accounting numbers. Findings of this study should be of much interest to corporate management, accounting standard setters, investors and others interested in capital market based accounting research. This greater understanding could be translated into improved decision making for these three main financial statement groups

The role of voluntary disclosure in listed company: an alternative model

The aim of this paper is to propose a model of social reporting that allows improving the communication of sociability and quantify the sociability. The research approach follows a qualitative methodology, applying a single method approach. The observations are the result of an empirical analysis carried out on the Italian-Stock-Exchange listed companies that have an independent social or sustainability balance sheet. The findings of this research are based, first, on collection of data about the sample, in order to identify the strong and weak points in terms of its management and economic evaluation, and secondly on the introduction of an alternative method of social accounting, with the objective of measuring the sociability of company communication

Barriers to Implementing the International Integrated Reporting Framework: A Contemporary Academic Perspective

Purpose: This paper is motivated by the International Integrated Reporting Council’s (IIRC) call for feedback from all stakeholders with knowledge of the International Integrated Reporting Framework , and specifically of the enablers, incentives and barriers to its implementation. The paper synthesises insights from contemporary accounting research into integrated reporting (IR) as a general concept, and integrated reporting as espoused by the IIRC in the (IIRC, 2013). We specifically focus on possible barriers and emphasise the specific issues we feel could be rectified to advance the , along with the areas that may potentially hinder wider adoption and implementation. Design/methodology/approach: The paper draws upon and synthesises academic analysis and insights provided in the IR and academic literature as well as various directives, policy and framework pronouncements. Findings: The flexibility and lack of prescription concerning actual disclosures and metrics in the could allow it to be used for compliance, regardless of the other benefits lauded by the IIRC. Thus we see forces, both external and internal, driving adoption, with one prominent example being the European Union Directive on non-financial reporting. Because of the different ways in which IR is understood and enacted, there are numerous theoretical and empirical challenges for academics. Our paper highlights potential areas for further robust academic research, and the need to contribute to policy and practice. Research limitations/implications: The paper provides the IIRC, academics, regulators and reporting organisations with insights into current practice and the framework. We highlight the need for further development and evidence to help inform improvements both from a policy and a practice perspective. A key limitation of our work is that we draw upon a synthesis of the existing literature which is still in an early stage of development. Originality/value: The paper provides the IIRC with several insights into the current , and specifically with the enablers, incentives and barriers to its implementation. Also, it provides academic researchers with a number of important observations and an agenda upon which they can build their future research

ANALYSING FACTORS INFLUENCING INTANGIBLE ASSET DISCLOSURE (STUDY IN SOUTH-EAST ASIA AND AUSTRALIA TELECOMMUNICATION INDUSTRY)

This study aims to examine intangible asset voluntary disclosure practices in annual report telecommunication company in South East Asia and Australia. This research sample is 75 telecommunication company at year 2007, 2008 dan 2009. Intangible asset disclosure study consist of three categories; structural capital, relational capital and human capital, based on Oliveira et al. categories. This study using content analysis method in annual report sample companies with index developed by Oliveira et al. as dependent variable. Independent variable which are firm size, leverage, ownership concentration, EBITDA margin, legal system of home country and secrecy accounting value, are analysed as factors influencing intangible asset voluntary disclosure practices. A significant positive relationship was observed between intangible asset voluntary disclosure and firm size and secrecy accounting value. However, leverage, ownership concentration, EBITDA margin and legal system of home country did not influence intangible asset voluntary disclosure practices

"Looking behind the veil": invisible corporate intangibles, stories, structure and the contextual information content of disclosure

Purpose – This paper aims to use a grounded theory approach to reveal that corporate private disclosure content has structure and this is critical in making "invisible" intangibles in corporate value creation visible to capital market participants. Design/methodology/approach – A grounded theory approach is used to develop novel empirical patterns concerning the nature of corporate disclosure content in the form of narrative. This is further developed using literature of value creation and of narrative. Findings – Structure to content is based on common underlying value creation and narrative structures, and the use of similar categories of corporate intangibles in corporate disclosure cases. It is also based on common change or response qualities of the value creation story as well as persistence in telling the core value creation story. The disclosure is a source of information per se and also creates an informed context for capital market participants to interpret the meaning of new events in a more informed way. Research limitations/implications – These insights into the structure of private disclosure content are different to the views of relevant information content implied in public disclosure means such as in financial reports or in the demands of stock exchanges for "material" or price sensitive information. They are also different to conventional academic concepts of (capital market) value relevance. Practical implications – This analysis further develops the grounded theory insights into disclosure content and could help improve new disclosure guidance by regulators. Originality/value – The insights create many new opportunities for developing theory and enhancing public disclosure content. The paper illustrates this potential by exploring new ways of measuring the value relevance of this novel form of contextual information and associated benchmarks. This connects value creation narrative to a conventional value relevance view and could stimulate new types of market event studies

The effect of audit committee characteristics on intellectual capital disclosure

This paper, using data from 100 UK listed firms, investigates the relationship between audit committee characteristics and intellectual capital (IC) disclosure. We find that IC disclosure is positively associated with audit committee characteristics of size and frequency of meetings, and negatively associated with audit committee directors’ shareholding. We find no significant relationship between IC disclosure and audit committee independence and financial expertise. We also observe variations in the association between audit committee characteristics and IC disclosure at its component level, which suggest that the underlying factors that drive various forms of IC disclosure, i.e. human capital, structural capital and relational capital, are different. These results have important implications for policy-makers who have a responsibility to ensure that shareholders are protected by prescribing appropriate corporate governance structures and accounting regulations/guidelines