Disclosure of Intellectual Capital in Annual Reports: An Exploratory Study of Indian IT Corporations

Abstract

Knowledge, innovation, information technology, and people are the key contributories in the future of any organization, and IC is the key driver of market value in the ―knowledge‖ economy. Voluntary disclosure of IC information in the annual reports is done by a few leading corporations. The omission of IC information, therefore, may adversely influence the quality of decisions made by shareholders, or lead to material misstatements. This study attempts to provide an insight into the ―narrative‖ style of IC disclosures done by the Indian corporations. In order to survey the recent IC disclosure scenario, we conducted a study of 16 Indian IT corporations in which the ‗content analysis' was done on their 2007 to 2009 annual reports. The results of this study confirmed that IC disclosure by these IT corporations is almost negligible and its disclosure had not received any preference from the mentors of these corporations. IC reports may initially be used for ‗internal' management purposes; but an ‗external' stakeholder-focus of IC report should be the ultimate goal.