Volume 7 - Issue 1

EJKM
Volume 7 Issue 1
April 2009

Intellectual Capital and IFRS3: a New Disclosure Opportunity
Daniel Brännström¹ and Marco Giuliani²
¹Department of Business Studies, Uppsala University, Sweden
²Department of Management, University of the Marche, Italy

As a response to the absence of an exhaustive generally accepted accounting principle handling the issue of intangibles, a plethora of concepts, models, methods and tools for identifying, measuring and valuing intangibles has been developed. Therefore empirical studies of how these models make the IC issue clearer to stakeholders in general and to the capital market in specific are requested. The introduction of IFRS3 may be considered as a possibility to introduce the methods and tools proposed by the Intellectual Capital (IC) community in the financial accounting issue as it demands the identification and valuation of intangible assets in business combinations. Consequently, IFRS3 becomes an opportunity to test, from an empirical perspective and on a large scale, the relevance of the IC models and to reduce the gap between IC and Financial Accounting. Thus, the aim of the paper is to analyze the distance, from an empirical perspective, between IC accounting and financial accounting in order to understand if a gap exists in practice and not only in theory. The methodology adopted is based on an empirical investigation of the purchase analyses supplied by a sample of firms in their financial statements, referring to the first year mandatory adoption of IFRS3 (fiscal year 2006). The disclosed information is examined through both quantitative and qualitative analyses.

The study finds that 1), the majority of IC is still labelled as goodwill 2) even if they represent the minority part of the invisible value of the company, several intangible assets usually not disclosed in the financial statements have been made visible 3) there is a lack of explanation for the high amount of goodwill. All in all, the paper highlights that, from an empirical perspective, both financial and IC accounting models are not able to adequately grasp IC “at work”.

Keywords: intellectual capital, valuation, financial accounting, goodwill, purchase analysis

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