Proceedings of the 3rd European Conference on Intellectual Capital

Perspectives on <strong>the</strong> Possibilities Companies Have to
Recognise and Measure Intellectual Capital
Maria Cristina Morariu
The Academy <strong>of</strong> Economic Studies, Bucharest, Romania
cristina.m.morariu@gmail.com
Abstract: Intellectual capital (IC) is a concept that in our view can be assimilated to <strong>the</strong> unidentified flying objects
in <strong>the</strong> way that researcher and academics have been asking questions such as: does it really exist? If it does,
what is it? Can we control it? Can we measure it? All <strong>the</strong>se questions corroborated with <strong>the</strong> fact that <strong>the</strong>re is no
unique world-wide accepted response to <strong>the</strong> recognition and valuation <strong>of</strong> IC, challenged us to <strong>the</strong> present
research paper. By trying to answer <strong>the</strong> questions mentioned above, our paper represents a mix between
literature review and conceptual analysis in <strong>the</strong> way that: (1) having as starting point <strong>the</strong> IC’s definitions
formulated so far, we are trying to draw one <strong>of</strong> our own; (2) we discuss different options that companies have to
recognise IC in <strong>the</strong> financial statements; (3) in our efforts to make a case for recognising IC as an asset, we are
analysing IC against several key words such as control, substance over form, risks, future benefits; (4) after
reviewing <strong>the</strong> models developed so far for measuring IC, we develop and launch a new model <strong>of</strong> our own; (5)
consequently we propose for debate an accounting treatment to recognise and subsequently measure IC; (6)
having in mind <strong>the</strong> disclosure requirements applicable to every financial statements item, this paper discusses
<strong>the</strong> ability <strong>of</strong> companies to disclose information about IC, and presents different views regarding <strong>the</strong> importance
and usefulness <strong>of</strong> IC reporting. As any study, our paper has limitations that are summarized and presented within
<strong>the</strong> conclusions section. The value and <strong>the</strong> originality <strong>of</strong> this research paper can be supported by <strong>the</strong> genuine
approach used to position IC as a component <strong>of</strong> <strong>the</strong> financial statements, <strong>the</strong> reasoning used to recognise,
measure and account for IC and last but not least by <strong>of</strong>fering a framework and a model that could be tested by
researchers in <strong>the</strong>ir future empirical studies.
Keywords: intellectual capital, definition, control, asset, measurement, disclosure, reporting
1. Introduction
The purposes <strong>of</strong> <strong>the</strong> study are: (1) to formulate a definition for IC, (2) to test whe<strong>the</strong>r IC meets asset
definition, (3) to provide an alternative tool for measuring and accounting for IC, (4) to convince that
IC reporting is possible and desirable.
Methodology used is a mix between literature review and conceptual analysis. We use literature
review as a foundation and as support for our new insights in <strong>the</strong> way that we discuss published
literature, we give a new interpretation <strong>of</strong> old articles and combine new with old interpretations;
never<strong>the</strong>less we trace <strong>the</strong> progression <strong>of</strong> <strong>the</strong> concepts analysed, we summarize and syn<strong>the</strong>size <strong>the</strong>
arguments and ideas <strong>of</strong> o<strong>the</strong>rs and we conclude <strong>the</strong> sections with our own ideas. Conceptual analysis
was also used when analyzing IC into its constituent parts and when testing if IC meets asset
definition criteria as we break down for analysis <strong>the</strong> key concepts <strong>of</strong> asset definition like control, future
economic inflows and measurement.
The objectives <strong>of</strong> <strong>the</strong> study are addressed in three different sections that give <strong>the</strong> structure <strong>of</strong> <strong>the</strong>
paper: <strong>the</strong> first purpose is addressed in <strong>the</strong> next section “Defining IC” after a summary <strong>of</strong> different
definitions given to IC; <strong>the</strong> second purpose and <strong>the</strong> third one are addressed toge<strong>the</strong>r in a single
independent section “IC faces asset definition” after we present different arguments for and against
recognising IC as an asset and after we summarise different tools developed so far to measure IC;
<strong>the</strong> fourth purpose is addressed in an independent section “IC disclosures” that presents different
views regarding <strong>the</strong> importance and usefulness <strong>of</strong> IC reports so to convince entities to report IC. The
paper ends with a final section “Conclusions” that draws <strong>the</strong> conclusions, presents <strong>the</strong> limitations <strong>of</strong>
<strong>the</strong> study and considers its future implications.
2. Defining IC
In time, economists such as Walras and Fisher considered human beings or <strong>the</strong>ir acquired abilities
and skills (English Classical school), as a component <strong>of</strong> capital (Kiker, 1966; Kendrick, 1961). Their
reasons for inclusion were: (1) <strong>the</strong> cost <strong>of</strong> rearing and educating human beings is a real cost; (2) <strong>the</strong>
product <strong>of</strong> <strong>the</strong>ir labour adds to <strong>the</strong> national wealth; (3) an expenditure on a human being that
increases this product will, ceteris paribus, increase national wealth (Kiker, 1966:485). In our days,
perspective has changed in <strong>the</strong> way that researchers and practitioners concentrate <strong>the</strong>ir attention on
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