Open AccessA Normative Approach to Valuation, Value Enhancement and Financial Statement Reporting of Intellectual Capital
Author(s) -
Michael So,
Janek Ratnatunga
Publication year - 2020
Publication title -
management accounting frontiers
Language(s) - English
Resource type - Journals
eISSN - 2209-0398
pISSN - 2209-038X
DOI - 10.52153/prj1022004
Subject(s) - intellectual capital , valuation (finance) , normative , intangible asset , business , accounting , actuarial science , finance , economics , political science , law
Intellectual capital (IC) is increasingly seen as an integral part of a firm’s value-creating processes and an essential strategic asset in creating corporate sustainable competitive advantage (Bukh, 2003; Chen, Cheng & Hwang, 2005). Nevertheless, reporting on IC is currently inconsistent, incomparable, and incomplete because of a lack of consistent guidance. This paper presents a normative IC valuation and reporting framework based on the Capability Economic Value of Intangible and Tangible Assets (CEVITA) approach (Ratnatunga, Gray & Balachandran, 2004). The proposed framework enables the application of CEVITA to the valuation of intellectual capital capability and provides a theoretical foundation for future empirical studies in relation to IC valuation and reporting.