Purpose – According to the current accounting standards, only a minor part of intellectual capital is presented in financial statements as it usually fails to satisfy one of the criteria of asset recognition in accounting, namely, reliable evaluation. Consequently, stakeholders obtain only a part of the data about an enterprise and its activity, which directly impacts the decisions they are committing to. Considering this, the scientific issue has been formulated and dealt with in this paper: how to present information on the intellectual capital of an enterprise in financial statements? Therefore the purpose of this paper is to develop a model of intellectual capital evaluation and its disclosure in financial statements of an enterprise.
Design/methodology/approach – When outlining a solution, this paper strives to concentrate on: 1) pragmatism in order to avoid overly extensive, complicated and subjective systems of intellectual capital valuation; 2) quantitative monetary expression of results thus providing opportunities for comparisons; and 3) intellectual capital accounting and accountability integrated into the current system of financial accounting. When analyzing methods of intellectual capital valuation suggested in academic works in terms of their theoretical and practical aspects, the methods of synthesis, grouping, systemization, descriptive and comparative analysis were being employed. When developing a model of intellectual capital evaluation and its disclosure in financial statements, deduction, synthesis, comparison and modeling methods were being applied.
Originality/value – Various methods of the evaluation of the intellectual capital suggested in academic works have been researched. On the grounds of possibilities of their integration into the system of financial accounting, a generalized scheme of the classification of these methods has been drafted. A generalized list of classification of intellectual capital valuation methods revealing similarities of some methods due to their attribution to the same groups in different classifications has been drawn as well.
Practical implications – The model of intellectual capital evaluation and disclosure in financial statements has been developed, theoretically motivated and empirically verified. Taking into consideration the successful application, this model is suggested to supplement the current financial statements and to regulate the duty of enterprises to include the data on the intellectual capital. As a result, development and filling out of additional reports would be avoided; meanwhile, stakeholders would obtain more data for taking investment decisions.
Keywords – Intellectual capital, Valuation methods, Financial evaluation, Disclosure