Moving from irrelevant intellectual capital (IC) reporting to value-relevant IC disclosures. Key learning points from the Danish experience
| Date | 09 January 2017 |
| DOI | https://doi.org/10.1108/JIC-07-2016-0071 |
| Pages | 81-101 |
| Published date | 09 January 2017 |
| Author | Stefan Schaper,Christian Nielsen,Robin Roslender |
| Subject Matter | Information & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & Finance,Accounting/accountancy,Behavioural accounting |
Moving from irrelevant
intellectual capital (IC) reporting
to value-relevant IC disclosures
Key learning points from the Danish experience
Stefan Schaper
Aarhus School of Business and Social Sciences,
Department of Business Development and Technology,
Aarhus University, Denmark
Christian Nielsen
Department of Business Studies, University of Aalborg,
Aalborg, Denmark and
Hogskolen i Hedmark, Hedmark, Norway, and
Robin Roslender
University of Dundee, Dundee, UK and
University of Aalborg, Aalborg, Denmark
Abstract
Purpose –Informed by the findings of a follow-up research study of companies originally involved in the
Danish Guideline Project (DGP) for intellectual capital statements (ICS), the purpose of this paper is to provide
valuable insights for a potential shift from intellectual capital (IC) reporting, largely informed by an
accounting perspective, towards IC-related disclosures.
Design/methodology/approach –The paper draws on data obtained from 21 semi-structured interviews
with respondents in 16 companies. The respondents were contacted following a genealogical exercise carried
out on the 102 companies involved in the DGP between 1999 and 2003.
Findings –The interviews suggested a rather critical perspective towards IC reporting using the ICS
framework. Despite the attempt of the DGP to establish a reporting standard, a range of experiments resulted
in changes to the framework’s original structure. Overall, a trend towards more integrated forms of reporting
was discernible, in some part being motivated by the need to reduce the levels of reporting overload.
Examples of integration designed to legitimise IC or corporate social responsibility reports, involving issuing
them in tandem with a recognised reporting vehicle such as the annual report, were also encountered.
Research limitations/implications –The implications of this study are that timely, value-relevant IC
disclosures and compliant reporting, primarily for accountability purposes, have the potential to coexist. In
addition to the usual limitations of a semi-structured interview research design, respondents’difficultiesin clearly
recalling events during the project after some 10-12 years is a further potential limitation. Additionally, the use of
internet-based communication channels for disclosure purposes was in its infancy at the time of the DGP.
Originality/value –The paper provides important insights into the mechanisms of IC disclosure and IC
reporting as seen from a practitioner perspective. Implications relevant to the continued development of integrated
reporting are also identified.
Keywords Regulation, Disclosure, Intellectual capital, Reporting, Integrated reporting,
Disclosure channels
Paper type Research paper
1. Introduction
There has been much discussion in recent years about whether or not current accounting
standards and corporate financial reporting practices are sufficiently informative with respect to
the different users of such information. The accounting scandals of a decade or so ago, of which
Enronisthemostinfamous,andtheemergenceoftheso-called“new economy”in which
intellectual capital (IC) has become a central component of the business models of both public
Journal of Intellectual Capital
Vol. 18 No. 1, 2017
pp. 81-101
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-07-2016-0071
Received 17 July 2016
Revised 18 August 2016
30 August 2016
Accepted 3 September 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
81
Learning
points from the
Danish
experience
and private sectors, are two of the notable influences affecting the expectations of the users of
accounting information. As a consequence, traditional financial reporting practices have come
under pressure. Increased information requirements from professional users have proved
particularly challenging. Despite this, accounting and reporting practices have largely failed to
keep pace with the changing environment (see e.g. Cañibano et al., 2000).
IC reporting has been identified as one potential solution for improving transparency by
reducing information asymmetries between the providers of corporate information and
those to whom it is normally directed (Eccles and Mavrinac, 1995; Johanson, 2003).
The reporting of IC information has also been claimed to reduce companies’cost of capital
(Bismuth and Tojo, 2008; Nielsen et al., 2015), and Dumay and Tull (2007) found that, in
particular, IC disclosures relating to internal capital were price sensitive. In addition, Gelb
(2002) argued that providing supplementary disclosures is especially important for firms
with significant levels of intangible assets, hence reinforcing the case for IC reporting.
Despite the relevance of IC reporting being rarely queried (e.g. Bukh, 2003), its reliability
remains of considerable concern to many within the accounting and reporting community,
something clearly evident in the debate surrounding the IAS 38 accounting standard
(Brennan and Connell, 2000; Van der Meer-Kooistra and Zijlstra, 2001; Cañibano et al., 2000;
Wyatt, 2008). Zéghal and Maaloul (2011) likewise found that IC was not recognised in
accounting terms but suggest that the voluntary disclosure of IC information forms part of a
solution to enhance corporate transparency. The distinction invoked here between reporting
and disclosure is worthy of note.
Followingthe emergenceof the early IC reportingpractices inScandinavia in themid-1990s,
there has been a proliferation of IC reporting approaches (Petty and Guthrie, 2000; Alcaniz et al.,
2011; Guthrie et al., 2012). However, the lasting impact of these practices has recently been
criticallyscrutinised by Dumayand Garanina (2013)and Nielsen et al. (2016, 2017). Despite the
optimistic rhetoric and proliferation in the initial phases, Dumay (2016) found that IC reporting
has completely disappeared from stock exchange-listed companies’annual reports and/or
websites,suggesting thatIC reporting, at leastthat which is mainlyinformed by an accounting
perspective, is uninteresting for the financial markets and hence not value relevant.
Integrated reporting (IR) is currently viewed as a reporting vehicle capable of
providing value-relevant information to reporting users, some of which relates to IC. Dumay
(2016) predicted that IR is at risk of suffering much the same fate as the intellectual capital
statement (ICS),as reported by Nielsen et al. (2016, 2017),in that it will not be able to persuade
practitioners involved in corporate reporting to explore the promise it holds for reporting; to
convince regulators to identify it as a mandatory requirement; or be captured by accounting
as did the ICS. Tohelp prevent IR, together withother forms of extra-financialreporting, from
failing inmuch the same manner, we believeit is crucial to learn from pastinitiatives, inter alia
the Danish ICS framework experience,to identify the underlying mechanisms that result in a
lack of perceivedvalue relevance. In so doing, we concur with Edvinsson’s(2013)observation
that “we need to go beyondIC reporting. We are on the edge of something,but what?”(p. 163).
Dumay (2016) argued that adjustment is easy to make because “all [the accounting and
reporting profession] needs to do is change their focus from reporting that does not provide
any information that is relevant to share prices to timely disclosure”(p. 179).
Building on the distinction between IC reporting and IC disclosure (Zéghal and Maaloul,
2011; Dumay, 2016), this paper studies the Danish ICS experience and builds upon the
previous contributions of Nielsen et al. (2016, 2017) by answering the research question:
RQ1. Can the Danish experience provide relevant insights on the value-added value of
embracing an IC disclosure approach rather than an IC reporting approach?
The empirical work thus focusses on identifying the predominant understandings of
reporting vs disclosure practices in the DGP data. This paper aims at providing a range of
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