Why Companies Disclose Intellectual Capital in Annual Reports

Why would companies choose
to disclose Intellectual capital
information in the narrative
sections of corporate annual
reports

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
REFERENCES................................................................................................................................7
Books and Journals......................................................................................................................7

INTRODUCTION
Intellectual capital are the intangible assets which are associated with the companies. It us
related to the expertise of employees, the process of the organisation and the knowledge
contained within the organisation (Allameh, 2018). The method to measure the intellectual
capital varies depending on the organisation. Organisation can increase the intellectual capital by
on boarding more employees, providing them training and developing new patents. The
importance for intellectual capital information is increased because of the current economic
condition.
MAIN BODY
Intellectual capital intangible resources are used to create a certain value for the
organisation. Some of the main intangible capital are human capital, structural capital and
relational capital. Disclosure of the intellectual capital in the annual reports is done by
determining the frequency of disclosure regarding the intellectual capital item is assessed. It is
the set of non financial and non physical resources which are used to gain competitive advantage
to the organisation (Kianto, Sáenz, and Aramburu, 2017). Intellectual capital is the intellectual
material which can be used to create wealth. Relational capital includes all the resources which
are connected to the external relations of the organisation. These external relations are with
customers, suppliers and even the partners in the process of research and development. It is the
combination of human and structural capital related to the organisation and its stockholders.
Human capital on the hand can be said to be the parameter used in the improving the
organisation. It includes employees which are used to increase the productivity and gain the
competitive advantage to sustain in the market. Human capital represents skills, knowledge,
capabilities and also the innovativeness regarding a particular problem.
Intellectual capital disclosure is defined as the report which is used to meet the
information needs and requirements to the common users. Such users are not capable to
command for the preparation of reports related to the intellectual capital. It is used to satisfy all
the information needs of the people (Chowdhury, Rana, and Azim, 2019). Intellectual capital
disclosure is a method which is used to measure the intangible assets of the company while
explaining the results coming from the knowledge of company and its activities. The type of
intellectual capital disclosure is information which is very valuable for the investors. It helps the