Intellectual Capital Valuation - The Case of Purchase Analyses in Sweden and Italy
2008 (English)In: PROCEEDINGS OF THE 9TH EUROPEAN CONFERENCE ON KNOWLEDGE MANAGEMENT / [ed] Harorimana D, Watkins D, 2008, 67-74 p.Conference paper (Refereed)
As a response to the absence of an exhaustive generally accepted accounting principle handling the issue of intangibles, academics and practitioners have developed a plethora of models, methods and tools for identifying, measuring and valuing intangibles. Conscious of this situation, some authors have started asking for empirical studies of how these models make the IC issue clearer to stakeholders in general and specifically to the capital market (Guthrie, et al., 2001; Marr and Chatzkel, 2004).
The introduction of International Financial Reporting Standard (IFRS) 3 (a regulation demanding the identification and valuation of intangible assets in business combinations) may be considered as the opportunity for a practical application of the methods and tools proposed by the Intellectual Capital (IC) community, i.e. to make intangibles such as customer capital, know how, etc. visible in the financial statement. The IFRS3 is a possibility to disentangle the "black-box" of goodwill and for the financial accounting issue to adhere to some of the critique emanating from the IC debate. As a result, the IFRS3 can be seen as an opportunity to test the relevance of the IC models and to reduce the gap between IC Accounting and Financial Accounting (Petty and Guthrie, 2000; Roslender and Fincham, 2001). Drawing on the debate of how to frame intangibles (Chaminade and Catasus, 2007), 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. Thus we will investigate how firms have applied the IFRS3 by studying what the value-relevance of intangibles is, which intangibles have been identified and valued and what goodwill is in the purchase analyses disclosed. The empirical corpus consists of financial statements of Swedish and Italian listed firms.
The methodology adopted is based on an empirical analysis of the purchase analyses supplied by the firms in the financial statements, referring to the first year mandatory adoption of the IFRS3 (fiscal year 2006). The disclosed information is analyzed through both quantitative and qualitative analyses.
The study finds that the analytical methods are still at a very first stage and consequently there is the trend to appreciate, at least in the financial statement, the majority of the IC as goodwill. The second finding is that even if they represent the minority part of the invisible value of the company, the IFRS3 has really allowed for several intangibles usually not disclosed in the financial statements such as customer relationships, contract portfolio, etc to be made visible. A third finding is the lack of explanations for this 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".
Place, publisher, year, edition, pages
2008. 67-74 p.
intellectual capital, valuation, financial accounting, goodwill, purchase analysis
IdentifiersURN: urn:nbn:se:uu:diva-131883ISI: 000259556500009ISBN: 978-1-906638-10-8OAI: oai:DiVA.org:uu-131883DiVA: diva2:355982
9th European Conference on Knowledge Management, Southampton Solent University, Southampton, UK, 4-5 September 2008.