Intellectual capital reporting by the New Zealand local government sector
| Date | 25 July 2008 |
| Published date | 25 July 2008 |
| DOI | https://doi.org/10.1108/14691930810892036 |
| Pages | 456-486 |
| Author | Annika Schneider,Grant Samkin |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Intellectual capital reporting
by the New Zealand local
government sector
Annika Schneider and Grant Samkin
Department of Accounting, University of Waikato, Hamilton, UK
Abstract
Purpose – The purpose of this paper is to assess the extent and quality of intellectual capital
disclosures (ICDs) in the annual reports of the New Zealand local government sector.
Design/methodology/approach – This paper makes use of an ICD index constructed through a
participatory stakeholder consultation process to develop a disclosure index which measures the
extent and quality intellectual capital reporting in the 2004/2005 annual reports of 82 local government
authorities in New Zealand. The final index comprised 26 items divided into three categories: internal,
external and human capital.
Findings – The results indicate that the reporting of intellectual capital by local government
authorities is varied. The most reported items were joint ventures/business collaborations and
management processes, while the least reported items were intellectual property and licensing
agreements. The most reported category of intellectual capital was internal capital, followed by
external capital. Human capital was the least reported category.
Research limitations/implications – There are a number of limitations associated with this
study. First the research covered only one year (2004/2005) which makes it difficult to draw any trend
conclusions. Second, differing legal reporting requirements may make it difficult to compare findings
of this research with findings of research conducted in other jurisdictions. The final limitation of this
study is its exploratory nature of this research and the use of a disclosure index to measure disclosure
levels.
Practical implications – The results in this paper indicate that local authorities are disclosing some
aspects of intellectual capital in their annual reports. However, there is no consistent reporting
framework and many areas of ICDs do not meet stakeholder expectations.
Originality/value – This paper is unique in that it is the first study to make use of an ICD index to
examine intellectual capital reporting by local government authorities.
Keywords Intellectualcapital, Disclosure, Annual reports,Local authorities, Stakeholderanalysis,
New Zealand
Paper type Research paper
We do not have any Intellectual Capital and there is therefore none reported in the Annual
Reports of the Wairoa District Council – August 2005.
1. Introduction
There is a general consensus among researchers and accounting practitioner s that
firms are leaving the industrial world and entering a new age driven by information
and the knowledge economy (Bontis et al., 1999; Chatterji, 2000; Clawson, 1996;
Guthrie, 2001; Sveiby, 1997). A key driver in this new world is knowledge (Bontis et al.,
1999; Petty and Guthrie, 2000). It has been suggested by Clawson (1996) and
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
JIC
9,3
456
Journal of Intellectual Capital
Vol. 9 No. 3, 2008
pp. 456-486
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930810892036
Bontis (2001) that a paradigm shift is occurring, bringing with it a new way of seeing
the world and that the “knowledge organisation” is the key to future financial success
in the “Information Age”. Brooking (1996) and Bontis (2001) attribute the shift in
thinking to information-age technology, the media and communications which have
provided tools with enormous intangible benefits to organisations.
Organisations began to realise that the key to success in the new strategic
environment was the careful management of information and knowledge (Quinn,
1992). As a result, greater emphasis was placed upon the intangible assets of an
organisation, particularly intellectual capital. The proliferation of conferences on
intellectual capital, the myriad of books, working papers and journal articles that deal
with the topic and the large number of consulting firms offering products and services
centred around intellectual capital are testament to this (Petty and Guthrie, 2000).
Intellectual capital reporting began as an accounting/management
practitioner-created concept. In the early 1990s, organisations such as Skandia,
Rambøll and GrandVision realised that existing financial accounting frameworks were
unable to adequately address the measurement and recognition of the new value
drivers in the economy. These organisations developed their own frameworks and
methods for measuring and managing intellectual capital. It has only been more
recently that scholarly contributions appeared to analyse and use the potential offered
by intellectual capital reporting (Bontis et al., 1999; Bounfour, 2003; Brooking, 1996;
Edvinsson and Malone, 1997; Guthrie et al., 2001; Sveiby, 1997).
Researchers and analysts have not yet reached unanimous agreement on the
definition of intellectual capital and its components (Bounfour, 2003; Kaufmann and
Schneider, 2004; Petty and Guthrie, 2000). This has led to the development of a plethora
of alternative intellectual capital disclosure (ICD), measurement and reporting models.
While each model is different, each inherently recognises that organisational
stakeholders require diverse types of information, extending beyond that delivered by
traditional accounting practice (Collier, 2001; Guthrie and Petty, 2000; Guthrie et al.,
2001). Skandia’s Navigator Scheme and the Balanced Scorecard are just two of the
many models developed for the recognition and measurement of intellectual capital.
A number of international studies have focused on ICDs by private sector
organisations in Australia (Guthrie et al., 1999; Guthrie and Petty, 2000), Canada
(Bontis, 2003), Ireland, (Brennan, 2001), Italy (Bozzolan et al., 2003), New Zealand
(Wong and Gardner, 2005), Singapore (Firer and Williams, 2005), Sri Lanka
(Abeysekera and Guthrie, 2004, 2005), Sweden (Olsson, 2001) and the UK (Williams,
2001).
Public benefit entities differ from private sector organisations in that their main
objective is not the creation of shareholder value, but rather the delivery of outcomes to
stakeholders. Public benefit entities are built largely on intangibles (Del Bello , 2006).
These include the skills, competencies, procedures and information systems controlled
by the entity. These generate intangibles of a collective nature such as public welfare,
quality of life, protection of the environment and reputation of a territory (Del Bello,
2006). It is these significant intangible resources that are generated, controlled and
managed by public benefit entities that are inadequately disclosed in traditional annual
reports.
The objective of this paper is to develop a disclosure index for assessing the extent
and quality of ICDs in the annual reports of the New Zealand local government sector.
Intellectual
capital
reporting
457
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