Intellectual Capital Reporting
Management Accounting Quarterly › Vol. 6 Nbr. 4, July 2005
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Summary
When there is a large disparity between a firm's market value and book value, that diff e rence is often attributed to "intellectual capital." Market value is, of course, the company's total shares outstanding times the stock market price of each. Book value is the excess of total assets over total liabilities. But what is the value of intellectual capital? Measuring the value of intellectual capital is difficult, but there are methods that can do it. One recent study categorized 12 different approaches to measuring intellectual capital, and another identified more than 30. The author will discuss and illustrate several of them, including one developed by Skandia Insurance Company Ltd. and Robert Kaplan and David Norton's balanced scorecard. The author will also address how intellectual capital can be included in external financial reporting and discuss how the accounting rules for reporting intangibles limits the recognition of intellectual capital. Finally, the author will outline two proposed approaches for reporting intellectual capital to stakeholders.
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Intellectual Capital Reporting
When there is a large disparity between a firm's market value and book value, that diff e rence is often attributed to "intellectual capital." Market value is, of course, the company's total shares outstanding times the stock market price of each. Book value is the excess of total assets over total liabilities. But what is the value of intellectual capital?
Measuring the value of intellectual capital is difficult, but there are methods that can do it. One recent study categorized 12 different approaches to measuring intellectual capital, and another identified more than 30.1 I will discuss and illustrate several of them, including one developed by Skandia Insurance Company Ltd. and Robert Kaplan and David Norton's balanced scorecard. I will also address how intellectual capital can be included in external financial reporting and discuss...See the full content of this document
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