Intellectual Capital

In: Business and Management

Submitted By renatatsang
Words 1937
Pages 8
teSeeking an effective way to report intellectual capital
Summary
In today’s knowledge economy, intellectual capital has been playing an increasingly significant role in creating corporate sustainable competitive advantages and becomes instrumental in determining the enterprise value. Though measuring the value of intellectual capital is difficult, with the emerging of intellectual capital valuation models, a number of leading companies have decided to make additional intellectual capital disclosure. This paper discusses and illustrates the intellectual capital statement. How to effectively measure and disclose intellectual capital in external financial reporting and how the accounting rules for reporting intangibles limit the recognition of intellectual capital and will also be discussed. The final part is proposed approaches to intellectual capital reporting.
Introduction
Our world is in the rise of new economy, principally driven by the information and knowledge. Today, a number of companies and organizations rely heavily on the knowledge and skills of their stuff and the network of the customer. As these intangible assets became increasingly critical, the limitations on financial statements in explaining a company’s value stress the fact that the source of economic value is no longer the production of material goods but the creation of intellectual capital.
Background
Definition
Stewart first defined intellectual capital as intellectual material-knowledge, information, intellectual property, experience-that can be put to use to create wealth. It now has become standard to say that a company's intellectual capital is the sum of its human capital (talent), structural capital (intellectual property, methodologies, software, documents, and other knowledge artifacts), and customer capital (client relationships).It is the ability to transform knowledge and…...

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