Voluntary reporting of intellectual capital. Comparing the quality of disclosures from New Zealand, Australian and United Kingdom universities
| Pages | 779-808 |
| Date | 12 October 2015 |
| DOI | https://doi.org/10.1108/JIC-03-2015-0022 |
| Published date | 12 October 2015 |
| Author | Mary Low,Grant Samkin,Yuanyuan Li |
| Subject Matter | Information & knowledge management,Knowledge management |
Voluntary reporting of
intellectual capital
Comparing the quality of disclosures
from New Zealand, Australian and
United Kingdom universities
Mary Low
Department of Accounting, University of Waikato, Hamilton, New Zealand
Grant Samkin
Department of Accounting, University of Waikato, Hamilton, New Zealand and
Department of Financial Accounting, University of South Africa,
Pretoria, South Africa, and
Yuanyuan Li
Department of Accounting, University of Waikato, Hamilton, New Zealand
Abstract
Purpose –The purpose of this paper is to examine the quality of voluntary intellectual capital (IC) by
universities in New Zealand, Australia, and the UK.
Design/methodology/approach –An IC framework was developed to measure IC reporting in the
university sector. Content analysis was used to analyse the 2011 annual reports before a three-year
comparative analysis of 90 universities (eight New Zealand universities, 38 Australian universities, and
44 UK universities) was undertaken.
Findings –New Zealand and Australian universities outperformed the UK universities in terms of IC
disclosures. Additionally, the study found moderate increases in the levels of IC disclosures over the
period of the study. The quality of IC disclosures by New Zealand universities was generally higher
than their Australian and UK counterparts. Internal capital and human capital were the most disclosed
categories with external capital being the least frequently disclosed in all three countries. However, the
quality of external capital disclosures was higher than internal and human capital. Finally, most IC
disclosures were narrative in nature.
Practical implications –The frameworkdeveloped in this study could be adapted,further enhanced,
and then applied to exploringIC disclosures in higher educational institutes in other jurisdictions.
Originality/value –This is the first comparative analysis of IC disclosures made by universities in
three countries.
Keywords Universities, Intellectual capital, Quality disclosure
Paper type Research paper
1. Introduction
Intellectual capital (IC) is recognised as the pivotal driver behind value creation in
many private and public sector organisations (Whiting and Miller, 2008). Alcaniz et al.
(2011) explain that “strategy permeates the entire organisation, identifying the path
that all departments and functions have to pursue in order to accomplish the objective
of creating value”(p. 106). Importantly they state that “intellectual capital resources
are often performance drivers; hence there is a causal relationship between those
resources and value creation”(p. 106). Some studies have suggested that between
50 and 90 per cent of the value created by an organisation may be derived from its IC
rather than the production of goods and services (Guthrie et al., 2004b). In spite of its
Journal of Intellectual Capital
Vol. 16 No. 4, 2015
pp. 779-808
©Emerald Group Publis hing Limited
1469-1930
DOI 10.1108/JIC-03-2015-0022
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reporting of IC
importance, it is unusual for IC items to appear on organisational balance sheets.
The reason is that these intangible assets are not normally captured by traditiona l
accounting practices (Sonnier et al., 2007; Yi and Davey, 2010; Alcaniz et al., 2011;
Rashid et al., 2012). Adding to IC’s importance is the fact that it is increasingly being
seen as an innovative management technology (Chiucchi and Dumay, 2015) and is
topical in the academic literature and practice.
Early IC research focused primarily on establishing definitions and reporting
frameworks, that is, IC classifications (Bontis, 2001, 2003; Sveiby, 1997; Petty and Guthrie,
2000). These definitions and frameworks have been examined by IC research studies
conducted in a number of countries including Australia, Ireland, Sri Lanka, Italy, the UK,
the USA, Canada, New Zealand, Brazil, China, Hong Kong, Sweden, Spain, Portugal,
Malaysia, the Netherlands, Singapore, and India. In addition, organisations including the
Organisation for Economic Co-operation and Development, the Association of Chartered
Certified Accountants, and the Institute for Social and Ethical Accounting have attempted
to develop voluntary IC disclosure frameworks (Boesso and Kumar, 2007; Organisation for
Economic Cooperation and Development (OECD), 2001; Association of Chartered Certified
Accountants (ACCA), 1999; ISEA, 1999). However, in spite of these efforts, consensus on an
IC disclosure framework has yet to be achieved. Nevertheless, there have more recently
been efforts to develop an intellectual capital maturity model which Secundo et al. (2015)
indicate is a flexible model for implementing IC approaches with public universities.
Consequently, it would be interesting to investigate the uptake of this model by universities
in their reporting of IC.
Most prior studies on IC disclosure have focused on knowledge-intensive or
services-based industries. However, in spite of its nature as a producer and supplier of
knowledge, the university sector appears to have been largely overlooked. Secundo et al.
(2015) write that “the public sector is one of the least addressed areas of intellectual capital
(IC) research”(p. 419) and that “universities are an interesting area of investigation because
they are considered critical players in the knowledge-based society”(p. 419). The authors’
study explores IC information voluntarily disclosed in annual reports of universities for the
purpose of gaining a better understanding of the disclosure practices of this sector. Similar
to corporate entities, universities are legally independent, and their governing bodies are
responsible for the effective management of the institution and for planning its future
development (Higher Education Funding Council for England, 2005).
Further, in recent years universities have been going through extensive changes in
the way they are administrated. Although a large percentage of incom e received by
universities was traditionally provided by governments, this has decreased in recent
years. Therefore, in order to attract additional funds from external sources, universities
are more likely to increase their intangible assets in ways that are likely to generate
income to fund operations. Therefore, considering the importance of IC to universities,
it is surprising to find that literature examining IC reporting practice by universities is
relatively scarce. Alcaniz et al. (2011) state that “surveys of practice are valuable and in
due course may lead to new policy initiatives”(p. 105). More importantly, they argue
that “the absence of much critical work on IC accounting remains a worrying lacuna,
not least because of its potential to pose challenging questions about the broader
ramifications of organisations’increased reliance on such assets”(original italics, Alcaniz
et al., 2011, p. 105). This important argument suggests that the lack of research into IC
disclosures in the university sector has ramifications for this sector as university
management are not being challenged to look at policy initiatives that account for IC assets.
Secundo et al. (2015) write that “in the wide range of public organisations several studies
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