The management, measurement and the reporting of intellectual capital

Publication Date01 Mar 2001
AuthorJames Guthrie
SubjectAccounting & finance,HR & organizational behaviour,Information & knowledge management
of IC
Journal of Intellectual Capital,
Vol. 2 No. 1, 2001, pp. 27-41.
#MCB University Press, 1469-1930
The management,
measurement and the
reporting of intellectual capital
James Guthrie
Macquarie Graduate School of Management, Sydney, Australia
Keywords Intellectual capital, Knowledge management, Intangible assets,
Management accounting, Financial reporting.
Abstract The rise of the ``new economy'', one principally driven by information and knowledge,
international competitiveness and changing patterns of interpersonal activities is attributed to the
increased prominence of intellectual capital (IC) as a management and research topic. There is
indeed much to support the assertion that IC in the new century will be instrumental in the
determination of enterprise value and national economic performance. Stemming from this
awareness of the value of know-how is a drive to establish new metrics that can be used to record and
report the value attributable to knowledge within an organisation. The task has been given impetus
by the fact that early work appearing in the accounting financial reports of Swedish companies
involves the application of non-financial metrics and focuses on intangible assets. This represents a
significant departure from traditional financial and management accounting orthodoxy.
The growth in interest surrounding knowledge management and intellectual
capital (IC) has occurred commensurate with the rise of ``virtual'' corporations
and a flourishing service industry. Particularly for these companies, book
values correlate poorly with market capitalisation. Consequently, two main
knowledge management missions are evolving (Guthrie and Petty, 1999). First,
there is the continuing quest to develop better systems for creating, capturing
and disseminating knowledge within organisations. Second, there is a growing
awareness that know-how adds significantly to the value of a business and, in
some cases, represents almost the entire value base.
Stemming from these is the emergence of IC discourse accompanied by the
drive to establish new metrics that can be used to record and report the value
attributable to IC (Guthrie and Petty, 2000). It is time for traditional financial and
The current issue and full text archive of this journal is available at
This paper is based on a lecture presented at The Chartered Institute of Management
Accountants (CIMA), London, UK, July 5, 2000. A transcript of this second CIMA Visiting
Professor lecture is available on the CIMA Web site: An article
based on the lecture will appear in CIMA's journal. The author would like to thank Dr Armen
Gakavian, MGSM, for his valuable editorial work. Many of the ideas in this public address and
review of the literature appear in previous publications with Richard Petty which are referenced
in the body of the article. These include a number of professional and research journals on
Intellectual Capital including Australian CPA, Charter, Company Secretary, Management
Today and the Journal of Intellectual Capital. The author is also indebted to the OECD
secretariat for the recent symposium in Amsterdam, as this provided the intellectual
stimulation to advance the area of intellectual capital measuring and reporting. The
responsibility for the contents of this article nonetheless remains entirely that of the author.

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