Annual report IC disclosures in The Netherlands, France and Germany
| Published date | 01 March 2005 |
| Pages | 89-104 |
| DOI | https://doi.org/10.1108/14691930510574681 |
| Date | 01 March 2005 |
| Author | Philip G.M.C. Vergauwen,Frits J.C. van Alem |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Annual report IC disclosures
in The Netherlands, France
and Germany
Philip G.M.C. Vergauwen
Faculty of Economics and Business Administration,
Department of Accounting and Information Management,
Universiteit Maastricht, Maastricht, The Netherlands, and
Frits J.C. van Alem
KPMG Audit, KPMG Accountants NV, Amstelveen, The Netherlands
Abstract
Purpose – This paper replicates and extends the Bontis research on intellectual capital (IC)
disclosures in Canadian companies and also elaborates on the Beaulieu et al. research on disclosures by
Swedish firms.
Design/methodology/approach – The paper studies IC disclosures by French CAC-40, Dutch AEX
and German XETRA-DAX publicly-listed companies for the years 2000 and 2001. The paper also
discusses country-specific arguments in favour of and against voluntary disclosure by such
companies and searches both the annual reports and financial statements for IC hits.
Findings – Applying the Gray-scale to categorise countries, the paper finds not only that voluntary
IC disclosure significantly differs between these countries, but also that this difference can be
explained by country-specific regulation and auditor conservatism.
Research limitations/implications – The paper only studies Dutch, French and German IC
disclosures in annual reports and financial statements. These three countries are European Union
member states but “differ” significantly from one another. The differences discussed in this paper,
however, are by no means exhaustive, nor do they picture the “European situation” in full.
Practical implications – The paper recognises that the intangible nature of IC creates tension with
current country-specific legislation and strongly calls for convergence of applicable accounting
standards and practices because of the increasing importance of IC and because of the improvement of
corporate governance and policy making.
Originality/value – The paper not only extends (or fine-tunes) previous research, but also links with
the literature that discusses the consequences of country-specific characteristics for accounting
standards and practices.
Keywords Intellectualcapital, Information disclosure, Publicsector organizations, The Netherlands,
France, Germany
Paper type Research paper
Introduction
Although intellectual capital (IC) receives increasing attention from accountants in
recent years, the innovativeness of the specific concept makes IC not fully
“incorporated” in financial (accounting) reports as yet. Only when compa nies would
provide IC statements on a large scale, we would be able to speak of a true reporting
revolution in company valuation, both in theory and practice.
This paper at first replicates the Bontis (2002) research on IC disclosure in Canada
and elaborates on the Beaulieu et al. (2001) research on IC disclosure by Swedish firms.
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/1469-1930.htm
Annual report IC
disclosures
89
Journal of Intellectual Capital
Vol. 6 No. 1, 2005
pp. 89-104
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930510574681
Second, it also extends this research by looking not only at financial statements, but
also at the annual report in full. Doing so, we investigate current IC disclosure practice
in three European countries, namely France, The Netherlands and Germany, looking at
French CAC-40, Dutch AEX and German XETRA-DAX publicly-listed companies. Our
research findings are compared with not only with Bontis (2002), but also with research
findings of O’Regan et al. (2001) on Ireland.
Theoretical framework
1. IC and accounting regulation
Disclosure of IC-related information by companies is done on a voluntary basis, as
applicable accounting regulations dictate the definition of a balance sheet an d the
assets to be included in that balance sheet. This definition does not apply to IC items,
as can be illustrated by extracts from, e.g. Dutch accounting regulations:
An asset is an object that results from events in the past, that is owned by the company and
which is expected to generate economic benefits to the company in the future (Stichting voor
de Jaarverslaggeving, 1997, Art. 1.05.102).
An asset is to be included in the balance sheet when it is probable that future economic
benefits will go to the company and when the asset has a cost-price or value which can be
determined reliably. Assets that do not meet these requirements shall not be included in the
balance sheet (Stichting voor de Jaarverslaggeving, 1997, Art. 1.05.104).
When comparing IC to the regulatory definitions, several problems immediately
appear. IC, as commonly defined in academic literature, consists of human capital (HC),
structural capital (SC) and relational (or customer) capital (RC) (Bontis, 1998).
HC refers to the value of all the people within the organisation and the benefits that
can be obtained by utilising their skills and knowledge. However, although they do add
value to the company, employees are not owned by the company, and are therefore no
assets in the strict sense. They may be restricted by labour contracts but they always
have the possibility to resign without any involvement by the company they work for.
SC refers to the structures and procedures within the organisation that can be used
by the employees to put their knowledge and skills to work. Besides documented
processes that result from “best-practices” comparisons, this class also includes
something like a “supportive culture” and “efficiency” (Bontis, 1998). Given the
regulatory definitions it becomes apparent that these items have no cost, nor do they
have a value that can be determined reliably. They are absolutely necessary to employ
the HC and there is abundant proof of their existence, but it is nearly impossible to
express them in monetary amounts. Reliable valuation by the auditor is impossible:
there are no guidelines on how to valuate a culture or how to determine the cost of
efficient procedures.
RC – or customer capital – contains the knowledge of marketing channels and the
value of customer relationships. There is no doubt about the value generating
capacities of these items, but they do not meet the “asset” definition of regulatory
legislators since these items are no “objects”, or no tangible assets.
This would result in the exclusion of IC-related items from financial statements:
they only meet the requirement of the expectation of future economic benefits for
inclusion in the financial statements. Although insufficient, this requirement is exactly
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