intellectual capital and valuation challenges in the.pdfVIP

Journal of Finance and Accountancy Intellectual Capital and Valuation: Challenges in the Voluntary Disclosure of Value Drivers Richard M. Petty Macquarie University Suresh Cuganesan Swinburne University of Technology Nigel Finch The University of Sydney Guy Ford Macquarie University ABSTRACT Many commentators have identified the pivotal role of intellectual capital in the valuation of firms and the determination of their future earnings. Innovation in voluntary disclosure of intellectual capital lead by European firms, such as Celemi and Skandia, has generated a plethora of new reporting frameworks such as the Balanced Scorecard. However, there has been little support by the accounting profession to recognise the value of intellectual capital or adopt a common disclosure framework. There has also been very little progress by firms in extending their voluntary reporting frameworks, beyond just rhetoric, and attempting to quantify their intellectual capital. This paper will critically evaluate the challenges faced by firms in disclosing the elements and value of their intellectual capital to the market. Keywords: intellectual capital, valuation, reporting, voluntary disclosure Intellectual Capital, Page 1 Journal of Finance and Accountancy THE IMPORTANCE OF INTELLECTUAL CAPITAL There is increasing eviden