Does financial materiality judgement matter in reporting intellectual capital? A systematic literature review and future research trends
| Date | 09 August 2024 |
| Pages | 87-108 |
| DOI | https://doi.org/10.1108/JIC-03-2024-0083 |
| Published date | 09 August 2024 |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & finance,Accounting/accountancy,Behavioural accounting |
| Author | Matteo Pozzoli,Francesco Paolone,Elbano de Nuccio,Riccardo Tiscini |
Does financial materiality
judgement matter in reporting
intellectual capital? A systematic
literature review and future
research trends
Matteo Pozzoli
Department of Law, Universit
a degli Studi di Napoli Parthenope, Naples, Italy
Francesco Paolone
Universitas Mercatorum, Rome, Italy
Elbano de Nuccio
Department of Management, Finance and Technology,
Libera Universit
a Mediterranea “Giuseppe Degennaro”, Bari, Italy, and
Riccardo Tiscini
Universitas Mercatorum, Rome, Italy
Abstract
Purpose –This paper aims to investigate materiality judgement providing insights, critiques and future
research paths in light of the open debate on the role of materiality in corporate financial disclosure,
highlighting potential connections and implications with sustainability and intellectual capital (IC) reporting.
Design/methodology/approach –The research presents an overview of the analysis of financial
materiality, including new stimuli from recent studies and regulatory requirements for financial and non-
financial reporting. Accordingly, this study used a systematic literaturereview (SLR) based on a combination
of content, text and bibliometric analysis of materiality in accounting research studies, collecting data from the
Scopus database as one of the most relevant repositories.
Findings –The SLR identified four relevant research trends, concerning: (1) the relevance of materiality principles
in corporate disclosure; (2) financial reporting practices and materiality; (3) theories and approaches in defining
financial materiality and (4) the existence of quantitative and qualitative thresholds in the materiality judgement.
Research limitations/implications –The results provide theoretical and practical implications when
comprehending the development of the concept of financial materiality in financial statements and whether
they can be appropriate in reporting IC as well. We identified future research paths.
Practical implications –From a practical perspective, this study is useful for companies implementing
financial materiality based on stakeholder engagement and improving their transparency in financial and non-
financial reporting practices.
Social implications –The research investigates if the process for assessing materiality is in line with the
expectations of all stakeholders involved in financial and non-financial reporting.
Originality/value–This research is the first to investigate the scientific basis and applicability of the concept
of financial materiality to sustainability and IC reporting.
Keywords Financial materiality, Sustainability reporting, Intellectual capital reporting,
Systematic literature review
Paper type Research paper
Journal of
Intellectual
Capital
87
© Matteo Pozzoli, Francesco Paolone, Elbano de Nuccio and Riccardo Tiscini. Published by Emerald
Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0)
licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both
commercial and non-commercial purposes), subject to full attribution to the original publication and
authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/
legalcode
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 21 March 2024
Revised 10 May 2024
1 July 2024
Accepted 1 July 2024
Journal of Intellectual Capital
Vol. 25 No. 7, 2024
pp. 87-108
Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-03-2024-0083
1. Introduction
Although the topic of materiality has recently been discussed among scholars, its concept has
a long history and has been debated since the 1950s, as a complementary aspect to the
reliability of financial statements.
In recent years, scholars, regulators and practitioners have been “obliged”to address the
concept of materiality applied to sustainability reporting (Baum€
uller and Sopp, 2022;Raith,
2022). Currently, regulators are wondering if financial materiality should be the star guiding
the identification of a “sole”concept of materiality or if, as suggested by the European
Commission (2019) and the European Financial Reporting Advisory Group (EFRAG, 2021),
impact materiality and financial materiality should co-exist in corporate reporting (Jørgensen
et al., 2022;Delgado- Ceballos et al., 2023).
While the investigation of the concept of materiality in sustainability reporting has
increased in recent years (Eccles et al., 2012), there is a gap in the literature when considering
if the development of the academic conceptualisation of materiality which is applied when
preparing financial statements, is also appropriate in sustainability reporting as well (Bota-
Avram, 2022;Khan, 2022). This issue appears to be critical when applied to intellectual capital
(IC) reporting (Paoloni et al., 2023).
This paper aims to investigate financial materiality judgements, providing insights,
critiques and future research paths. We present an overview of materiality analysis, which
has been developed from the new stimuli from recent studies on corporate reporting. To this
end, we used a systematic literate review (SLR) based on a combination of content, text and
bibliometric analysis of materiality in academic research studies, collecting data from the
Scopus database (Garanina et al., 2022;Massaro et al., 2016).TheScopusdatabaseiswidely
applied to bibliometric analyses because it is suitable for exporting data, covers a wide set
of papers in the field of business economics, and is generally recognised as a scientific
reference by the academic community (Aksnes and Sivertsen, 2019;Dabi
cet al.,2021;Gao
et al., 2021).
We retrieved a dataset of 102 documents. After two rounds of screening and reading of the
(1) title, abstract and keywords, and (2) research aims, we compared our results, selecting 49
core articles to achieve our research aims covering the period 1977–2022. From our analysis,
we identified the main thematic clusters, drafting four “Research Trends”.
The contribution of this paper is to provide the first comprehensive debate on materiality
in academic research studies, proposing future research issues on its adoption for IC
reporting.
We also offer theoretical and practical implications by the retrieved research paths
guiding the application of judgements for financial materiality assessments. Theoretical
implications offer insights that have never been carefully addressed by scholars before. The
main implications are: (1) the relevance of materiality in financial statements and its under-
investigated role in non-financial statements; (2) the existence of materiality’s facets about
management processes; (3) adjusting the relationship between materiality and stakeholders’
informational needs and (4) the call for additional quantitative and qualitative thresholds to
meet investors’information needs on IC disclosure.
Our study can be useful for regulators and standard-setters, as they can take the
opportunity to provide a more comprehensive framework of materiality implementation,
providing financial disclosures to overcome the issues of ambiguity and low effectiveness for
stakeholders, also converging towards satisfying the broader information needs arising from
the recent sustainability stimuli (Street and Gordon, 2023). Contextually, it can support
regulators in distinguishing the practical determination of financial materiality for financial
and sustainability reports.
The literature review and theoretical framework are described in Section 2. The method
and research protocols are provided in Section 3. Empirical results and the new proposed
JIC
25,7
88
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