INTELLECTUAL CAPITAL PERFORMANCE REPORTING MODELS

For a knowledge-based economy, the basic drivers of economic growth and development are the knowledge, innovation and specific skills of individuals whose „incorporation” into a product/service makes them attractive to customers in the market according to the needs of the 21st century. Thus, in the era of the knowledge economy, individuals with their knowledge, specific abilities and skills represent the basis for creating and maintaining a competitive advantage in the market. However, the traditional financial reporting model cannot fully meet the information requirements of users of 21st century financial statements due to the limited absorption of data concerning the company’s ownership of intangible resources such as knowledge, specific skills of employees and other intellectual resources. In order to fully, reliable and truthful business reporting Many companies choose to voluntarily report on non-financial performance through various reports such as the Business Report and the Notes to the Financial Statements. The aim of this paper is to present modern models of reporting on intellectual capital and to point out possible directions of their further development in the future. Also, in this paper, special emphasis is placed on segments of business assets whose balance sheet (non) coverage leads to significant differences between the book and market values of companies.

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Measurement of Intellectual Capital as Exemplified by Methods of Groups Based on the Roa Indicator and on Market Capitalization

e-Finanse ◽

10.1515/fiqf-2016-0008 ◽

2017 ◽

Vol 12 (4) ◽

pp. 58-71

Author(s):

Karolina Palimąka ◽

Mateusz Mierzejewskl

Keyword(s):

Intellectual Capital ◽

Food Industry ◽

Intangible Assets ◽

Financial Statements ◽

Point Of View ◽

Market Capitalization ◽

Knowledge Based ◽

Theoretical Approaches ◽

Knowledge Based Economy ◽

Business Analysis

Abstract The concept of a knowledge-based economy is a relatively new topic, but it does not mean that the previous economies did not use knowledge. For many years, knowledge formed the basis of any economy, it was a factor that set the pace of each of them, but just nit is making a significant impact on the entrepreneurial environment, and more. Inherent KBE is the concept of intellectual capital. The article raises both theoretical approaches towards the concept of intellectual capital, and points to the importance (from the point of view of managing this intangible value in the company) -of measuring intellectual capital. The process of good management of the value of intangible assets must be supported by knowledge about, e. g.,its size, value, etc. The authors focus on presenting methods of measuring intellectual capital from two groups of methods by the classification made by K. E. Sveiby, who is considered one of the fathers of the IC concept. The goal of the article is to compare methods from these two groups in terms of their flaws and advantages as regards preparing business analysis. This is done through presentation of the topic, including the concept and methods of intellectual capital measurement, which was based on the review of the literature.Furthermore, based on financial statements of companies from the WIG- oil&gas index and WIG- food industry indexwaysof interpreting the final results are presented.

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Accounting “gets real” in dealing with virtual manufacturing

Journal of Intellectual Capital ◽

10.1108/14691930510611085 ◽

2005 ◽

Vol 6 (3) ◽

pp. 322-338 ◽

Cited By ~ 5

Author(s):

Mike Tayles ◽

Margaret Webster ◽

David Sugden ◽

Andrew Bramley

Keyword(s):

Financial Reporting ◽

Intellectual Capital ◽

Intangible Assets ◽

Financial Analysis ◽

Balance Sheet ◽

Virtual Manufacturing ◽

Managerial Accounting ◽

Content Type ◽

Market Values ◽

Virtual Organisation

PurposeOf relatively recent origin is the virtual organisation where companies are able to marshal the necessary competencies from a range of independent external agents through the strategic use of outsourcing mechanisms. The paper discusses the challenge of accounting for intellectual capital (IC) and intangible assets and presents a financial analysis and background of companies exhibiting different levels of virtuality, from traditional manufacturing to virtual manufacturing.Design/methodology/approachThis paper is based on the interaction of the researchers with three companies examining their positions on the continuum from traditional to virtual manufacturing. Case studies of the companies and some key financial results for a period of years are presented in order to explore implications and inform strategic decisions.FindingsIt concludes that conventional financial reporting for IC and intangibles has limited scope. This is elaborated through contrasts in a number of conventional accounting measures and some others, less conventional, to highlight the implications of the intellectual capital employed. The results are reported and implications of these discussed in the context of the companies whose background and activities are briefly outlined.Practical implicationsThe measurement and management of the intangible assets and intellectual capital of organisations has been the focus of recent research in accounting and finance. This has applied to the corporate reporting of financial results involving its impact on the balance sheet, managerial accounting concerned with decisions and the internal use of various financial and non‐financial performance measures and finance where market values of companies have been shown to differ significantly from their book values as shown in published accounts.Originality/valueThe content will be of interest to academics studying issues surrounding the reporting and decision making concerning intellectual capital and intangibles. Additionally, managers and consultants whose companies are engaged in outsourcing and or virtual/semi‐virtual manufacturing should find the results informative.

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Reporting on the Past: A New Approach to Improving Accounting Today

Accounting Horizons ◽

10.2308/acch.1999.13.4.315 ◽

1999 ◽

Vol 13 (4) ◽

pp. 315-322 ◽

Cited By ~ 57

Author(s):

Russell J. Lundholm

Keyword(s):

Financial Reporting ◽

Financial Statements ◽

Financial Accounting ◽

Practical Implementation ◽

Wealth Creation ◽

The Past ◽

Knowledge Based ◽

Ex Post ◽

Knowledge Based Economy ◽

Accounting Model

In the last few years the financial accounting model has been attacked on a number of fronts. Some argue that the model reports irrelevant information in today's knowledge-based economy, while others argue that the model's reporting discretion makes the results unreliable. Accruals allow the model to report wealth creation or depletion in a more timely manner, yet they also allow abuse when the underlying estimates are intentionally distorted. But surprisingly, the accuracy of the estimates underlying the accruals is never examined; rather current accruals are mixed together with the reversals of prior accruals. I propose that the financial reporting model be amended to report on the ex post accuracy of a firm's prior estimates. Doing so will identify firms that have abused their reporting discretion in the past and provide valuable information about the expected credibility of the firm's disclosures in the present. Firms will also have a greater incentive to make accurate estimates and accruals if they know that opportunistic estimates will be explicitly revealed in the future. Finally, accounting regulators might be more inclined to recognize nontraditional assets in the financial statements if a system is in place that gives firms an incentive to accurately estimate the value of these assets. In this paper I give an example of the type of disclosure I am proposing, discuss the benefits it offers to investors, and address some practical implementation issues.

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ACCOUNTING FOR INTANGIBLES: THE GREAT DIVIDE BETWEEN OBSCURITY IN INNOVATION ACTIVITIES AND THE BALANCE SHEET

The Singapore Economic Review ◽

10.1142/s0217590801000243 ◽

2001 ◽

Vol 46 (01) ◽

pp. 83-117 ◽

Cited By ~ 8

Author(s):

ANNE WYATT

Keyword(s):

Financial Reporting ◽

Intangible Assets ◽

Balance Sheet ◽

Generic Properties ◽

Balance Sheets ◽

Knowledge Based ◽

Innovation Activities ◽

Knowledge Based Economy ◽

Intangible Investments ◽

Intangible Investment

This paper analyses descriptive data from a discretionary accounting setting and several generic properties of innovation activities to explain why intangible assets are grossly under-recognized in company balance sheets. Existing literature and publicly available data indicates the increasing significance of intangible investment in the growth and development of firms and the stock of knowledge. However, a systematic framework to reliably quantify the stock of intangible assets remains elusive. This paper contributes to the debate surrounding recognition of intangible assets by demonstrating how economic attributes of intangible assets arise from generic features of innovation activities, and identifying the nature of the mis-match between accounting principles and the economic attributes of intangible assets which serves to reduce the relevance of accounting information. It is argued that accounting has become inwardly focused on the internal consistency of accounting relative to an outdated set of principles. Before an accounting asset can be recognized financial reporting systems typically require a 'cost' verifiable from a past transaction which the firm can directly link to expected future revenues. This narrow accounting approach is inconsistent with the properties of intangible investments in the knowledge-based economy.

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The Valuation And Reporting Of Reputation Risk Management Capability

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v5i10.2588 ◽

2011 ◽

Vol 5 (10) ◽

Author(s):

Janek Ratnatunga ◽

Michael Vincent

Keyword(s):

Risk Management ◽

Financial Reporting ◽

Balance Sheet ◽

Integrated Approach ◽

Financial Statements ◽

Annual Reports ◽

Market Values ◽

Risk Manager ◽

Management Procedures ◽

Reputation Risk

The Financial Statements prepared and audited in today’s economic environment can be traced to the industrial era, when tangible assets such as machinery were the engines of growth. In this era, financial accountants endorsed or invented rules based on the historical cost doctrine that yielded values which had no counterparts in commercial reality – often book valuations were sheer fictions, and thus managing the risk associated with those valuations became a meaningless exercise. This was especially the case when intangible assets such as an organisation’s Brand Equity and Reputation were kept off the Balance Sheet, thus making the valuations even more fictitious. This has resulted today in knowledge-economy companies reporting book values widely divergent of market values. These fictitious financial reports were then audited, and the auditors were paid well by the preparers of the statements to hold that the statements gave a true and fair view of the state of affairs of the company. When some of these companies failed spectacularly due to the mismatch between commercial reality and reported values, the reason for failure was pinpointed to the irreparable damage to the company’s reputation due to the lack of adequate risk management procedures, resulting in a failure traced to an organisation’s products, services, information systems or external auditors. Since the spectacular collapses of Enron and WorldCom in the international stage, many countries have introduced either mandatory or voluntary corporate governance procedures. In the USA, SOX 404 makes mandatory the reporting of all significant risks in a company’s annual reports, albeit outside of the financial statements, as an off-balance sheet item. This paper argues that the overriding reason for governance is ultimately the safeguarding of an organisation’s reputation, and that this requires an integrated approach where the ‘accountees’ (corporations), and its investors and regulators are provided with appropriate information by the ‘accountors’, i.e. the accounting profession. It also argues that although the current professional accounting standards result in financial statements that are not adequate for the proper governance, an integrated approach can be taken where reputation risk can not only be managed and valued; it can also be incorporated in these financial statements. The paper provides a valuation model based on the premise that risk management should not be based on what the organisation has, but instead what the organisation can do, i.e. its capability to manage and enhance its reputation in order to ultimately generate incremental future cash flow. It then suggests an approach that auditors can take to determine its strategic capability of sustaining and generating value via reputation enhancement. Finally, the paper considers the role of the Risk Manager, and how an empowered open-book approach to communicating and financial reporting can provide significant motivational benefits in risk reduction and reputation enhancement that ultimately result in increased value.

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The relationship between knowledge-based economy and fraudulent financial reporting

Journal of Facilities Management ◽

10.1108/jfm-07-2021-0076 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Abbas Koolivand ◽

Mahdi Salehi ◽

Meysam Arabzadeh ◽

Hassan Ghodrati

Keyword(s):

Financial Markets ◽

Financial Reporting ◽

Fixed Effects ◽

Stock Exchange ◽

Fraudulent Financial Reporting ◽

Content Type ◽

Knowledge Based ◽

Robust Testing ◽

Knowledge Based Economy ◽

The Relationship

Purpose This paper aims to assess the relationship between a knowledge-based economy and fraudulent financial reporting. Design/methodology/approach The study is descriptive-correlation based on published information from enlisted firms on the Tehran Stock Exchange during 2013–2019 with a sample of 178 firms (1,246 observations). The method used for hypothesis testing is linear regression using the panel data. Findings The results show that a knowledge-based economy is associated negatively and significantly with financial reporting. Moreover, robust testing has also examined the hypotheses (including fixed effects, OLS and t + 1) that confirmed the study’s preliminary results. Originality/value As the study was carried out in the emergent financial markets, like Iran, to figure out the relationship between knowledge-based economy and financial reporting, it can provide helpful information for the practitioners in this field.

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EARNINGS MANAGEMENT AS A MANIPULATIVE FORM OF FINANCIAL REPORTING

Knowledge International Journal ◽

10.35120/kij34051323m ◽

2019 ◽

Vol 34 (5) ◽

pp. 1323-1328

Author(s):

Marija Milojičić ◽

Snežana Knežević ◽

Aleksandar Grgur

Keyword(s):

Earnings Management ◽

Financial Reporting ◽

Financial Analysis ◽

Balance Sheet ◽

Financial Statements ◽

Legal Framework ◽

Business Decisions ◽

Accounting Principles ◽

The Republic

The financial statements, as the end product of the accounting information system, are a structural account of the financial position and financial success of an entity's business over a period. Earnings or net profit indicates an important position in the financial statements and is considered as a measure of a company’s success. Earnings management comes from the accounting skills that executives and business owners use when making business decisions. The Generally Accepted Accounting Principles set out in International Accounting Standards (hereinafter IAS) and International Financial Reporting Standards (hereinafter referred to as IFRS) generally give the owner or manager the choice between several accounting methods within the various stages of the accounting process. One of these methods is creative accounting, which is often correlated with the manipulation of financial statements. Creativity in accounting is known to be legal and to stay within the legal framework, but it is often the case that, with its creativity, it is beyond its boundaries. The way managers exercise this discretion is very important to the quality and objectivity of financial reporting.The tendency of the owners, and then the managers, to show the performance of the company better than they really are, is certainly not new. The reason that in the world from the beginning of the 2000s to the present day, both by the scientific and professional public and by the regulatory bodies in charge of financial reporting, particular attention is paid to this problem are the major political and economic scandals caused by the inaccurate presentation of financial statements. It is considered that manipulative accounting practices are applied in the preparation of financial statements when the application of accounting principles is made with the intention of achieving the desired objective, such as, for example, generating greater profit regardless of whether the procedures selected are in accordance with international and local prescribed rules.The prevalence of manipulation of financial statements depends on the situation in the environment, the quality of the normative basis of financial reporting, the quality of management and the ability of accountants to comply with professional and ethical standards. The environment implies the general economic situation, the existence or absence of appropriate legislation, including its implementation, as well as the relation to tax liabilities.The result of the original empirical research is presented in this paper. The research was conducted in the form of a case study of a domestic business entity (the Republic of Serbia), whose main activity is trade in sports and fashion products. The financial analysis was performed using the Beneish model, which was derived from the official financial statements of the companies, collected from publicly available databases (Balance Sheet and Income Statement 2016-2018) as the basic information base in order to discover the degree of possible manipulation of their own earning capacity. This model has become particularly popular since the Beneish M-scoring model revealed the manipulation of the financial results of the US company Enron, which went bankrupt in 2001.

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Transition to the Knowledge-Based Economy within the Modernization Paradigm for the States in the Core and Semi-Periphery of the Global Economic System

THE PROBLEMS OF ECONOMY ◽

10.32983/2222-0712-2021-3-117-123 ◽

2021 ◽

Vol 3 (49) ◽

pp. 117-123

Author(s):

O. A. Dovgal ◽

◽

G. V. Dovhal ◽

H. V. Serdiuk ◽

◽

...

Keyword(s):

Economic System ◽

Intellectual Capital ◽

Main Function ◽

Economic Resource ◽

The Core ◽

Knowledge Based ◽

Catching Up ◽

Knowledge Based Economy ◽

Innovative Model ◽

Intellectual Production

Abstract: The article generalizes the features of modern transition from industrial to post-industrial (or knowledge-based) economy within the modernization paradigm for the states in the core and semi-periphery of the global economic system. It is proved that among the historical diversity of national modernization phenomena one can single out two alternative models: an innovative model and a catching-up one. It is substantiated that the innovative model is most typical for the countries forming the core of the world economic system, while the catching-up model is more typical for countries in the periphery of global development. It is revealed that modern intellectual production covers, first of all, economic sectors producing information and knowledge. At the same time, intellectual capital also functions in productive industries, influencing their indicators as well. That is why knowledge workers, who form the intellectual strata of society, are considered to be subjects of intangible intellectual production, the latter making up the core of knowledge economy. Their main function is to produce intellectual products (socially valuable knowledge), in contrast to groups, whose social function is to embody these values and knowledge. It should also be noted that concrete historical forms of knowledge objectivisation, ways of their reproduction and, accordingly, historical types of intellectual layers can differ considerably. It is concluded that knowledge-based economy is considered as a sphere of economic activity, which nowadays is characterized by intensive use of intellectual capital as the main economic resource, in the fields of material production as well.

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Instructional Case: Worldwide Shipping Corporation Ltd: Early or Late Adoption of a New International Accounting Standard?

Issues in Accounting Education ◽

10.2308/iace.1999.14.2.211 ◽

1999 ◽

Vol 14 (2) ◽

pp. 211-231

Author(s):

Peter Lee ◽

Pearl Tan

Keyword(s):

Financial Reporting ◽

Financial Analysis ◽

Balance Sheet ◽

Financial Statements ◽

Economic Consequences ◽

International Accounting ◽

Accounting Choice ◽

Accounting Standard ◽

The Impact ◽

International Accounting Standard

The management of Worldwide Shipping Corporation Ltd (hereafter “Worldwide Shipping”) is confronted with a dilemma when a new international accounting standard on leases is introduced which contains a transitional provision allowing firms to defer implementation for a period of four years. Students are required to put themselves in the position of managers who have to weigh the adverse impact of early adoption of the new accounting standard against a responsibility for fair financial reporting. Worldwide Shipping is a multifaceted case that can be used as an accounting case study or a financial analysis study. The objectives of the case are threefold. First, it aims to provide students with a better understanding of the impact of off-balance sheet transactions (in this case, sale-leaseback contracts) on a firm's financial statements. Second, it requires students to examine implications of accounting choice on management compensation and debt-contracting costs, as well as the perplexing problem of recognition in financial statements vs. footnote disclosures. By putting students in the position of managers, the case increases students' awareness of the possible economic consequences arising from accounting choice. Third, it provides students with a useful exercise in the mechanics of effecting a change in accounting method using the retroactive method.

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Evaluating the Intellectual Capital of Technology Transfer and Learning Public Services

International Journal of Engineering Business Management ◽

10.5772/56002 ◽

2013 ◽

Vol 5 ◽

pp. 7 ◽

Cited By ~ 9

Author(s):

Michele Grimaldi ◽

Musadaq Hanandi

Keyword(s):

Technology Transfer ◽

Organizational Performance ◽

Intellectual Capital ◽

New Technologies ◽

National Agency ◽

Analytic Hierarchy ◽

Knowledge Based ◽

Core Competences ◽

Knowledge Based Economy ◽

Transfer Unit

Since the rise of the knowledge-based economy, many worldwide companies have begun to deal with different frameworks to manage and evaluate the performance of intellectual capital, especially in the area of knowledge management services. This paper presents a novel conceptual model aiming to support management in evaluating and prioritizing their intellectual capital competitive core competences. Based on the analytic hierarchy process, the model analyses interdependences among intellectual capital elements and determines the impacts of core competences on organizational performance. To validate the model, it is empirically applied in the Technology Transfer Unit of the Italian national agency for new technologies, energy and economic development.

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