An Overview of Measuring and Reporting Intellectual Capital

Abstract

Value creation process is based on intellectual capital or intangibles rather than tangible assets in today's business environment. Therefore, measuring and reporting of intellectual capital for different issues has become a hotly debated issue in the literature. Currently, it is fair to say that existing financial reporting framework has an inadequacy in disclosuring intellectual capital and there is no consensus on a method to measure intellectual capital correctly as well as a generally accepted model has not been emerged in the literature yet. This chapter aims to cover main methods employed in measuring and evaluating the value of intellectual capital by considering its effect on company value and to assert the inadequacy of traditional accounting to report intellectual capital on financial statements. Moreover, applicability of methods is also discussed in terms of their ability to benefit from accounting numbers. The study is concluded by showing the need on developing new and innovative methods to overcome the challenge of measuring and reporting intellectual capital.