Intellectual Capital and IFRS3: A New Disclosure Opportunity

Abstract: 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 intangible assets such as customer capital, know how, etc. visible in the financial statement. 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, 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 Catasús, 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 IFRS3 by studying what the relevance of intangibles is, which intangible asset