The Japanese Government's intellectual capital reporting guideline. What are the challenges for firms and capital market agents?
| Date | 01 October 2006 |
| DOI | https://doi.org/10.1108/14691930610709121 |
| Published date | 01 October 2006 |
| Pages | 474-491 |
| Author | Ulf Johanson,Chitoshi Koga,Matti Skoog,Johan Henningsson |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
The Japanese Government’s
intellectual capital reporting
guideline
What are the challenges for firms and
capital market agents?
Ulf Johanson
Ma
¨lardalen University, Va
¨stera
˚s, Sweden
Chitoshi Koga
Kobe University, Kobe, Japan
Matti Skoog and Johan Henningsson
Ma
¨lardalen University, Va
¨stera
˚s, Sweden
Abstract
Purpose – The purpose of the present paper is to discuss the Guideline for Intellectual Property
Information Disclosure (GIPID) in relation to the ambitious aspirations behind the guideline and in that
way develop a future research agenda aiming at addressing the main challenges regarding the
construction of guidelines for future IC reporting.
Design/methodology/approach – The purpose will be achieved bycomparing the GIPID with two
other IC guideline proposals, namely MERITUM and the Danish Guideline for Intellectual Capital
Statements, respectively, from a capital market communication perspective and from a management
control perspective. References are made to 12 Japanese companies that have published IP reports. The
sample companies operate in a wide range of nine industries covering, for example, security,
manufacturing, transportation, and chemistry, and comprise large as well as small firms.
Findings – The study identifies four major challenges for intellectual capital guidelines and
reporting. These challenges regard market communication, management control, uniqueness versus
comparability, and confidentiality versus accountability. The paper concludes with a number of
questions of vital importance for future research within the research area.
Originality/value – This is one of the first papers thatdiscuss the Japanese Guideline for Intellectual
Property Information Disclosure as well as to compare it with similar European guidelines.
Keywords Intellectualcapital, Intellectual property, Financialreporting, Japan
Paper type Research paper
Introduction
During the last hundred years there has been an ongoing discussion of different IC
categories, and in the middle of the 1990s a number of OECD conferences were held to
encourage attention to the question on how to account for IC (e.g. Organization for
Economic Cooperation and Development, 1997a, b, c, 1999). The OECD initiative was
based on the notion that intangibles appear to be increasingly important as
determinants of enterprise growth, productivity gains, profitability and wealth
creation. However, the importance of intangibles exceeds the current ability to
recognize and measure them. This gap is also evident in external reporting, which
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
JIC
7,4
474
Journal of Intellectual Capital
Vol. 7 No. 4, 2006
pp. 474-491
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930610709121
might cause misallocation in capital markets. One indication of the gap was in the
mid-1990s was proposed to be the increasing difference between market value and
book value of companies. At the OECD conference in Amsterdam in 1999 a consensus
was reached to take steps in the deployment of voluntary guidelines for measuring,
reporting and managing intangibles.
With some years of delay compared with the OECD, the European Commission (EC)
started a comparable process based on the idea that the key to future competitiveness and
wealth was to increase the stock of knowledge among the European companies. The EC
proposed an approach holding that training investments ought to be treated in the same
way on the balance sheet as other capital investments (European Commission, 1995). In
contrast to this balance sheet oriented proposal, the OECD proposed that some kind of
new reporting framework had to be constructed and later on subjected to standardization.
At an OECD conference in Helsinki it was stated that intellectual capital (IC) seemed to be
a more promising way forward than human resource accounting (Organization for
Economic Cooperation and Development, 1997a). In internal documents the OECD even
had on their agenda that they should in 1998 propose global voluntary guidelines for the
external reporting of intangibles. In later documents the OECD still kept the main idea of
encouraging the development of global voluntary guidelines but no date was given. After
that the interest in IC from the OECD seemed to decline even if the organization among
others supported a conference in Madrid in 2002 (E *Know-Net, 2004).
In October 2004 the Japanese Ministry of Economy, Trade and Industry (METI)
presented its thoughts and the Guideline for Intellectual Property Information
Disclosure (GIPID) at an OECD conference. They issued a guideline in order to increase
the acknowledgement of intellectual assets through an extension of corporate reporting
(Ministry of Economy, Trade and Industry, 2004). The ambition behind the initiative is
to promote a “nation built on intellectual property” by means of encouraging firms to
practice an “intellectual property-backed management”. The Japanese initiative was
generated and developed under the following background (Ministry of Economy,
Trade and Industry, 2004, pp. 94-98):
(1) Becoming a nation that quests for sustained growth of its economy and society through
vigorous promotion of creation, protection and exploitation of intellectual property,
namely, a “nation built on intellectual property”, is an urgent goal for Japan to strengthen
its industrial competitiveness.
(2) There is a need to enhance dramatically the exploitation of intellectual property, as well
as its creation and protection. It is important to recognize the intellectual property
strategy as the center of the management strategy, called “intellectual property-backed
management”, in the trinity of business strategy, R&D strategy, and intellectual
property strategy.
(3) It is important that an environment is constructed that permits companies that practice
“intellectual property-backed management” to receive fair valuation in the capital
market while they strive to achieve sustained growth.
(4) For the mutual understanding between companies and capital markets about the
information disclosure of companies’ “intellectual property-backed management”,
especially about the information of patent and R&D, intellectual property information
disclosure will be required. Guideline for Intellectual Property Information Disclosure
(GIPID) is its basic guideline.
Intellectual
capital reporting
475
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