Beattie 2007

Accounting Forum 31 (2007) 129163
Lifting the lid on the use of content analysis to

investigate intellectual capital disclosures
Vivien Beattie a , Sarah Jane Thomson b,
a
Department of Accounting and Finance, University of Glasgow, 65-73 Southpark Avenue,

Glasgow G12 8LE, UK
b Department of Accountancy and Finance, School of Management and Languages,
Heriot-Watt University, Edinburgh EH14 4AS, UK
Abstract
This methods paper highlights specific issues that arise in using content analysis to investigate intellectual
capital (IC) disclosures. The use of content analysis in the IC context is debated through an analysis of prior
studies and the use of an illustrative example (Next plcs 2004 annual report). It is concluded that the depth
and breadth of the IC concept and the lack of common definitive language make it difficult to establish the
extent and nature of disclosure currently provided. The range of choices available to researchers in terms
of analysing and measuring IC disclosures further hinders interpretation and comparability. Transparency
in the choices made is required. Shared meanings could be developed and the IC concept better understood
through increased transparency in the categorisation of IC information, which in turn could further assist in
the interpretation and comparison of findings across studies.
2007 Elsevier Ltd. All rights reserved.
Keywords: Intellectual capital; Corporate disclosure; Methods; Content analysis
1. Introduction
Content analysis has become a widely used method of analysis in financial accounting research
(Beattie, 2005). In recent years, several papers in accounting journals have identified and discussed
significant issues regarding the use of content analysis to investigate accounting disclosures. One
strand of this literature takes corporate social reporting (CSR) as its context (i.e. Hackston &
Milne, 1996; Milne & Adler, 1999; Unerman, 2000). More recently, the topic area of intellectual
capital (IC) disclosures has been explored (Abeysekera, 2006; Guthrie, Petty, Yongvanich, &
Ricceri, 2004). The present paper contributes to the latter area of enquiry.
Corresponding author. Tel.: +44 131 451 3559; fax: +44 131 451 3296.
E-mail addresses: V.Beattie@accfin.gla.ac.uk (V. Beattie), S.Thomson@hw.ac.uk (S.J. Thomson).
0155-9982/$ see front matter 2007 Elsevier Ltd. All rights reserved.
doi:10.1016/j.accfor.2007.02.001
130
V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163
IC is the term attributed to intangible assets which create company value (Mouritsen, Larsen,
& Bukh, 2001). It is, at least in part,1 reflected in the difference between market and book values,
as the value and impact of intangibles are inadequately reflected in the traditional accounting
framework (Cordon, 1998). To highlight the potential significance of IC, studies have reported
market-to-book multiples in excess of unity. For example, Gu and Lev (2004) report that the
S&P 500s average market-to-book ratio was 4.5 in September 2003 indicating for every US$ 4.5
of market value, only US$ 1 appears on the balance sheet. Beattie and Thomson (2005) found
the mean market-to-book value for the UK FTSE 100 companies to be 2.52 based on data for
year-end 2002/2003. In light of this evidence, a method for reporting IC information to external
stakeholders appears to be required.
The term IC is now widely used among regulators, professional bodies and academics. Many
attempts have been made at formal definition. However, according to Guthrie, Petty, & Johanson
(2001), intellectual capital frequently is poorly defined or is not defined at all. Zambon (2005)
has stated that a generally agreed taxonomy is needed. Despite this apparent stumbling block,
considerable efforts have been made to develop models for IC reporting (e.g. DATI, 2000, 2002;
DMSTI, 2003; Edvinsson & Malone, 1997; Lev, 2001; Sveiby, 1997). Suggestions have been made
to extend the balance sheet to integrate IC, or to create complementary balance sheets (Rylander,
Jacobsen, & Roos, 2000). Recently, a focused narrative-based approach to IC reporting has been
proposed (DATI, 2000, 2002). However, the opportunity to report IC in narrative format already
exists within corporate annual reports.
Corporate annual report narratives may provide the opportunity for IC reporting, but what about
the incentive to do so? Voluntary disclosure of IC information can be explained in terms of theories
such as positive accounting theory (PAT), legitimacy theory and stakeholder theory (Deegan,
2000; Deegan & Gordon, 1996). If company managers interests are aligned with shareholders,
IC information will be disclosed if it brings benefits to the company (PAT). IC reporting provides
companies with the opportunity to take advantage of increased transparency to capital markets,
establishing trustworthiness with stakeholders and to employ a valuable marketing tool (Van
der Meer-Kooistra and Zijlstra, 2001). Disclosure of IC information could be self perpetuating
in terms of maintaining and enhancing IC value given that intangible asset creation occurs
through enhanced reputation and disclosure influences the external perception of reputation
(Toms, 2002, p. 258). However, reluctance to report IC information may arise from fear of both
loss of competitive advantage and litigation.2 Companies may disclose IC information to appear
legitimate in the eyes of society and avoid the imposition of costs arising from non-legitimacy. The
disclosure choices of comparable companies may shape legitimacy. IC disclosure may respond
to the demands of the stakeholders most critical to the companys ongoing survival (managerial
branch of the stakeholder theory).
These theories are mutually consistent, IC disclosure being explained in terms of a cost-benefit
trade-off. The ethical branch of the stakeholder theory appears to offer an alternative explanation.
Companies recognise that different stakeholders have a right to IC information and so disclosure is
responsibility-driven. However, executing responsibilities in terms of disclosure is not necessarily
1 The difference between market and book values can result from other factors such as the undervaluation of tangible
and financial assets recognised in the balance sheet, intangible liabilities that are not captured in the balance sheet and
market prices that do not accurately capture intrinsic value (Garca-Ayuso, 2003).
2 Elliot and Jacobson (1994) argue that increased informative disclosure actually decreases litigation costs as a result
of fewer allegations of insufficient disclosure. It also decreases litigation costs arising from allegations of misleading
disclosures through smaller claims, better defences and fewer law suits.
131
incongruent with increasing firm value. Another proposition (suggested by Miller, 1977, in the
context of capital structure decisions) is neutral mutation. Companies fall into disclosure patterns
or habits which have no material effect on firm value.
Given these theoretical explanations for disclosing (not disclosing) IC information, what is
corporate practice? The disclosure of IC information in annual reports is beginning to be investigated using content analysis (e.g. Bozzolan, Favotto, & Ricceri, 2003; Brennan, 2001; Guthrie &
Petty, 2000). (Other accounting-related documents that have been studied are IPO prospectuses,
e.g. Bukh et al., 2003, presentations to analysts, e.g. Garca-Meca, Parra, Larran, & Martnez,
2005, and analyst reports, e.g. Arvidsson, 2003.) This type of investigation could potentially serve
two purposes. First, to measure the extent to which different categories of IC information are disclosed. Second, IC reporting in practice provides valuable examples of attempts to understand and
capture the IC concept (Van der Meer-Kooistra and Zijlstra, 2001). Practical experiences would
assist in the development of a generally agreed taxonomy of IC terms, as called for by Zambon
(2005).
To date, content analysis appears to have been mainly used with the aim of quantifying the
number of IC disclosures, typically in relation to 22-25 categories of IC information. The observed
level of IC disclosure has consistently been described as low, and this has been attributed to
the lack of an established IC reporting framework and the general lack of a proactive stance
by companies in attempting to measure and externally report IC information (Guthrie & Petty,
2000). However, the lack of an established IC reporting framework hinders not only the companies
disclosing information. The depth and breadth of the IC concept evident in the academic literature,
and the subjectivity involved in constructing an operational IC definition, could also be said to
hinder researchers aiming to quantify IC disclosures. In this context, it is essential that the precise
details of the content analysis method used are transparent, to allow findings to be interpreted
and to make comparisons (or not) across studies. Transparency is important because the content
analysis method used to investigate disclosures is reflective of the researchers conception of
reality (Gray, Kouhy, & Lavers, 1995) what the researchers perceive constitutes IC rather than
any potential objective reality which exists in relation to the IC concept. Despite this importance,
a general lack of transparency in the content analysis methods used in the IC disclosure studies
to date is apparent. Increased transparency in relation to the IC information found and how it
is categorised would also clarify researchers understanding of the IC concept and assist in the
development of shared meanings.
This need for transparency and the development of shared meanings has already been recognised by researchers in the CSR context. As noted in Gray et al. (1995, p. 85), the use of content
analysis either demands, or at a minimum implies strongly, that the categories of analysis are
derived by reference to shared meanings and that the data collection and analysis must be replicable. In their construction of a research database of social and environmental reporting, categories
of disclosures and examples of types of information relating to the categories is provided. In doing
so, the result is at least transparent and replicable, even if it fails to meet an ideal of a fixed and
perfect definition (p. 82).
The aim of the present paper is to highlight specific issues that arise in using content analysis
to investigate the extent of IC disclosures. The use of content analysis in this context is debated
through an analysis of prior studies and the use of an illustrative example (Next plcs 2004 annual
report). The present study responds to Abeysekeras (2006) suggestions that coding frameworks
used to analyse annual reports need to be critically analysed, and the real problems of comparability
between IC disclosure studies need to be addressed. He calls for the operational issues arising
from the use of content analysis research methods to investigate IC disclosures to be resolved.
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The present paper highlights and illustrates these issues. In doing so, it aims to contribute to the
debate and help build a more secure foundation for future work.
The remainder of this paper is structured as follows. Section 2 considers the problems associated with defining the IC concept. Section 3 offers a review of extant content-analytic studies
of IC disclosure in corporate annual reports. Section 4 documents the use of Next plcs 2004
annual report to illustrate the use of content analysis to investigate IC disclosures. Summary and
conclusions are offered in Section 5.
2. Dening the IC concept
Many writers observe that there is no consensus on a precise definition of IC (e.g. Marr,
Schiuma, & Neely, 2004, p. 314). Furthermore, the terms intangibles and IC are frequently used
interchangeably.3 For example, Rylander et al. (2000, p. 716), Meritum (2002), Lev (2001) and Lev
and Zambon (2003) all explicitly state that both terms are used synonymously. Other studies offer
definitions of intangibles that coincide with common definitions of IC. For example, FASB (2001,
p. vi) state that [i]ntangibles include not only those resulting from research and development but
also human resources, customer relationships, innovations and others. Similarly, Gu and Lev
(2004, p. 1) define intangible assets as R&D, software, brand enhancement, employee training,
and the development of unique organizational designs and processes (organizational capital). It
has been argued that the precise terms used are associated with different disciplines, intangibles
being an accounting term and IC being a term used in the management/human resource field
(Chaminade & Roberts, 2003, pp. 736737). Traditional accounting definitions of intangibles are
narrow, including items such as intellectual property and patents that meet the criteria for balance
sheet recognition.
Despite the lack of an agreed definition of IC, it is argued (see, for example, Lev & Zambon,
2003, p. 603) that a broad consensus exists that IC comprises three major categories: human
capital, structural capital and relational capital (the latter two elements exist at the organisational rather than the individual level). The definitions presented in the Meritum Report (2002),
an influential report, are shown in Table 1. It is also increasingly accepted that synergies exist
in operating these categories of IC together, creating a fourth IC element, termed connectivity capital (see Habersam and Piber, 2003, who empirically identify connectivity capital as a
linking pin).
Although many authors adopt this set of three IC categories, there is evidence of synonymous
terms being used. For example, employees and employee competence are sometimes used in
place of human capital. Some writers use the terms internal capital or organisational capital
to refer to structural capital. Relational capital includes relationships with customers and other
groups external to the firm, also referred to as external structures. In consequence, relational
capital is also referred to as customer capital or external capital. The words structure(s) and
capital appear to be interchangeable in some situations.
Most writers perceive the IC construct as a hierarchy of nested concepts, with high-level categories such as human, structural and relational capital having multiple lower-level categories.
A total of 128 lower level IC terms, identified from a detailed content analysis of the IC literature, are shown in Table 2 (Beattie & Thomson, 2004). Four observations can be made regarding
this table. First, although many terms might be judged synonymous, this list suggests that IC is
Knowledge assets is the term often used in place of IC by economists (Lev, 2001).
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Table 1
Classification and definition of intellectual capital
Category of IC
Human
The knowledge that employees take with them when they leave the firm. Includes the knowledge,
skills, experiences and abilities of people. Some of this knowledge is unique to the individual,
some may be generic
Structural
The knowledge that stays within the firm at the end of the working day. Comprises the
organisational routines, procedures, systems, cultures, databases, etc. Some may be legally
protected and become Intellectual Property Rights, legally owned by the firm under separate title
Relational
All resources linked to the external relationships of the firm, with customers, suppliers or R&D
partners. Comprises that part of human and structural capital involved with the companys
relations with stakeholders (investors, creditors, customers, suppliers, etc.) plus the perceptions
that they hold about the company
Source: Meritum (2002, p. 63).
a broad concept. Second, there also appears to be a boundary problem between the high-level
categories, in that some lower-level categories are placed under different high-level categories
by different writers. For example, brands and distribution channels frequently appear under
relational/external/customer capital (e.g. Bozzolan et al., 2003; Brennan, 2001; Guthrie & Petty,
2000), but were placed by Rodgers (2003) under structural/internal/organisational capital). This
matters if these high-level categories have functions. Third, a distinction needs to be made (but
often is not) between lower level IC categories and indicators (i.e. measures) relating to them. For
example, staff profile is a lower level category, whereas number of employees is an indicator.
Fourth, the meaning to be attached to some lower level categories (e.g. innovation) cannot be
established without knowledge of context. Further, there is the potential for confusion arising
from a variation in the terms used to describe this hierarchy of nested concepts. For example,
some writers refer to human, structural and relational capital as components of IC rather than
categories (e.g. Van der Meer-Kooistra and Zijlstra, 2001). Some writers refer to both components and categories (e.g. Guthrie, Petty, & Ricceri, 2006). Lower-level categories are also
referred to as IC items (e.g. Abeysekera & Guthrie, 2005), attributes (e.g. Guthrie & Petty,
2000), or variables (e.g. Guthrie et al., 2006). For the remainder of this paper, in the IC context,
the term category refers to human, structural and relational capital. The term sub-category is used
to refer to the different categories of information within each of the high level human, structural
and relational capital categories.
The Meritum Report goes on to distinguish between resources (static) and activities (dynamic).
The resource concept is the stock or value of a given intangible at a point in time. The activity
concept implies an allocation of resources aimed at creating or acquiring new intangibles, increasing the value of an existing one or evaluating and monitoring the results of intangible activities.
Rylander et al. (2000, p. 737) describe flows as the transformations between and within stocks
of human, structural, physical and financial capital.
As the IC literature has developed, and practitioners and researchers have struggled to find ways
of managing and reporting on IC, there appears to have been an increasing amount of discussion of
related concepts such as strategy, value drivers, critical success factors and value creation (Bukh,
2003; Rylander et al., 2000). The boundary around the IC construct is not clear (Mouritsen, 2003)
and the link between the corporate value creation process and strategy suggests situation-specific
IC components.
134
Table 2
128 lower level IC categories identified from prior literature
Human capital
Structural capital
Relational Capital
Absence
Adaptability
Attitudes
Capability/abilities
Commitment
Communicative abilities
Competence
Computer literacy
Creativity
Development
Education
Employee expertise
Employee flexibility
Employee knowledge
Employee productivity
Employee satisfaction
Employee value
Employees
Entrepreneurial spirit
Equality
Expert networks
Expert teams
Friendliness
Further personal/professional training
Human assets
Human resources
Human value
Identification
Innovation
Innovative capacity
Juristic competence
Know-how (employees)
Learning capacity
Loyalty to organisation
Motivation
Perceptions
Personal/professional experience
Personal ability
Personnel
Recruitment
Reflect experiences (previous)
Sensitivity
Skill (employees)
Social competence
Staff (employee) profile
Staff turnover
Structural knowledge
Taking responsibility
Teamwork capacity
Tolerance for ambiguity
Up-to-date competence
Vocational qualifications
Work-related competencies
Work-related knowledge
Achieving mechanism culture

Administrative processes
Brands
Communication systems
Competitive and market channels
Copyrights
Corporate/organisational culture
Cultural diversity
Culture
Customer support
Customer-centered
Databases
Distribution channels
Documentation services
Financial relations
Infrastructure
Innovation
Intellectual property
Intellectual resources
Knowledge centre
Knowledge-based infrastructure
Laboratories
Management philosophy
Management processes
Operation process
Organisational flexibility
Organisational learning
Organisational routines
Organisational structure
Patents
Procedures
Process capability
Quality improvements
Quality management
Research projects
Specialised software/IT
Systems (information/network)
Trademarks
Basic marketing capability

Brands
Business collaborations
Client profile
Collaboration
Commercial power
Competitive intelligence
Competitors
Connectivity
Customer knowledge
Customer loyalty
Customer names
Customer reputation
Customer satisfaction
Customers
Diffusion
Environmental activities
Favourable contracts
Financial contracts
Franchising agreements
Image
Intensity
Knowledge/acquaintance with community
Knowledge/acquaintance with government
Knowledge/acquaintance with suppliers
Licensing agreements
Links with suppliers
Market intensity
Negotiating capacity with financial entities
Networking
New strategic customers
Reputation
Research collaborations
Stakeholders
Supplier knowledge
Source: Beattie and Thomson (2004).
135
3. Content-analytic studies of IC disclosures in annual reports

Despite the impediment of no precise IC definition, researchers have used content analysis
to examine corporate annual reports with the aim of identifying IC disclosures. Key features of
the methods employed in the main studies to date are summarised in Table 3. All but one study
from those identified conducted manual searches of small samples of corporate annual reports
for a number of sub-categories of IC information. Typically 22-25 terms across the three main
IC categories are searched for; Abeysekera and Guthrie (2005) used 45 terms clustered into 16
sub-categories across the three main IC categories; Bontis (2003) used a list of 38 terms without
classifying these into high-level categories. The IC sub-categories used are shown in Table 4.
From an analysis of the methods reported (or not reported) in these studies, the present paper
identifies six specific issues in using content analysis to investigate IC disclosures in corporate
annual reports. Many of these issues arise initially from a lack of transparency in the methods used.
The generic issues that arise in content analysis are well covered in texts such as Krippendorff
(1980), Boyatzis (1998) and Neuendorf (2002).
3.1. Concept boundary problems and coding reliability
According to Boyatzis (1998), content analysis requires a description of how to know when
a particular category occurs, any qualifications or exclusions, and examples of categorised information. There is a pervasive lack of explanation in previous studies of the detailed coding rules
used to allocate information to IC categories. This results, at least in part, from the boundary
problems identified above in relation to the IC construct as a whole, its main categories and the subcategories. This lack of explanation problematises the interpretation of findings from these studies.
It is impossible for the reader to judge which IC disclosures have been captured. For example,
Guthrie and Petty (2000), Brennan (2001) and April, Bosma, and Deglon (2003) use an IC framework containing six human capital IC sub-categories: employee know-how, employee education,
vocational qualifications, work-related knowledge, work-related competency and entrepreneurial
spirit. It is not known for sure whether, for example, employee profile information (turnover,
average age, etc.) is captured in this framework. This information may not be considered IC disclosure by the researchers under taking these studies, but as it is considered to be IC information
by some researchers in the field, knowledge of its inclusion (or not) is necessary for findings to be
interpreted and comparisons made across studies. Bozzolan et al. (2003) circumvent this situation
by removing vocational qualifications and entrepreneurial spirit in favour of a sub-category
employees. Guthrie et al. (2004) have also subsequently modified the list of IC sub-categories to
include this catch-all employee sub-category. It seems likely that this modified framework takes
a broader view of the IC concept and capture IC disclosures not previously counted, explaining
the increased disclosure levels reported by Bozzolan et al. (2003). However, replacing one list
of IC sub-categories with another without providing an adequate description of the content of
each sub-category does not further our understanding of the employee information found. Given
the subjectivity involved in defining IC, knowledge of the nature of information included and/or
excluded would appear necessary for others to judge from their perspective the extent to which IC
disclosures have been captured, and whether they perceive some disclosures counted as IC may,
in fact, not relate to IC at all.
The problem of allocating IC to categories without providing adequate explanation is illustrated
in the study by Abeysekera and Guthrie (2005). One of the sub-categories of human capital was
labelled equity issues. In the absence of further explanation, a logical interpretation of this
136
Table 3
Summary of methods used by content-analytic studies of IC disclosures in corporate annual reports
Country
Sample
Coding methods
Reliability checks
Guthrie and Petty (2000)
Australia
20 listed companies (inc. 19 largest

based on market capitalisation) as
at December 1998
One researcher coded the report; a

second researcher independently
confirmed the coding
Brennan (2001)
Ireland
Bontis (2003)
Canada
11 knowledge-based (i.e.
technology and people-orientated)
listed companies as at May 1999.
1997-99 annual reports
10,000 listed companies
Bozzolan et al. (2003)
Italy
30 non-financial companies listed

on Italian stock exchange, stratified
based on industry and sales.
2001 annual reports
24 IC terms across 3 categories: human

capital, internal capital and external
capital; incidence of terms recorded;
voluntary disclosures only
38 IC terms identified from IC literature;
Electronic word search; incidence of terms
recorded
capital; sentences scored and counted:
0 = no IC information, 1 = qualitative IC
information, 2 = quantitative IC
information; disclosure index computed at
overall and category level; repetitions
excluded.
April et al. (2003)
South Africa
20 largest listed companies as at

March 2001 (inc. 7 mining
companies)
Bozzolan, ORegan, and

Ricceri (2004)
Italy, Ireland, UK
Abeysekera and Guthrie

(2005)
Sri Lanka
30 non-financial listed companies

in each country. 2001 annual
reports (partial matching on size &
sector)
Top 30 listed on Colombo stock
exchange, based on market
capitalisation for y/e Dec.
1998 and 1999 annual reports

As Bozzolan et al. (2003); repetitions
excluded
45 terms clustered into 17 sub-categories

across 3 categories: human capital, internal
capital and external capital; sentences
counted and scored: 1 = IC liability,
0 = no IC information, 1 = IC asset
No mention
No mention
Used two coders; explanatory notes on

the content of each IC category with
examples prepared before analysis; coder
differences established over 5 annual
reports; Krippendorff alpha used to
measure reliability; annual reports coded
at two points in time to measure stability
No mention
As Bozzolan et al. (2003)
No mention
Study
Table 4
IC categories and sub-categories used in prior content analytic studies
Bozzolan et al. (2003) and Bozzolan
et al. (2004)
Bontis (2003)
Abeysekera and Guthrie (2005)
Human capital (employee competence)

Know-how
Education
Vocational qualification
Entrepreneurial spirit
Structural (internal)
Copyrights
Patents
Trademarks
Management philosophy
Corporate culture
Information systems
Networking systems
Financial relations
Human capital (employee competence)

Know-how
Education
Employees
Copyrights
Patents
Trademarks
Corporate culture
Information systems
Networking systems
Research projects
Relational (external/customer)
Brands
Business knowledge
Company reputation
Competitive intelligence
Corporate learning
Corporate university
Cultural diversity
Customer capital
Customer knowledge
Economic value added
Employee expertise
Employee know-how
Employee knowledge
Employee productivity
Employee skill
Employee value
Expert networks
Expert teams
Human capital
Training and development (know-how, vocational
qualifications, career development and taining
programs)
Entrepreneurial skills
Equity issues (race, gender, religion and disability
issues)
Employee safety
Employee relations (union activity, employees
thanked, employees featured in annual report,
employee involvement with the community)
Employee welfare (employee and executive
compensation plans, employee benefits, and
employee share and option ownership plans)
Employee-related measurements (value-added
statements, employee numbers, professional
experience, education levels, expert seniority, age
of employees)
Processes (management and technological)
Systems (information and networking)
Philosophy and culture
IC property
Financial relations
Brand building (brands, customer satisfaction and
quality standards)
Corporate image building (company names and
favourable contracts)
Guthrie and Petty (2000), Brennan

(2001) and April et al. (2003)
137
138
Table 4 (Continued )
Brands
Customers
Customer loyalty
Company names
Favourable contracts
Bozzolan et al. (2003) and Bozzolan

et al. (2004)
Customers
Customer loyalty
Research collaborations
Financial contacts
Bontis (2003)
Human assets
Human capital
Human value
IC
Information systems
Intellectual assets
Intellectual capital
Intellectual material
Intellectual property
Intellectual resources
KM
Knowledge assets
Knowledge management
Knowledge stock
Management quality
Organisational culture
Organisational learning
Relational capital
Structural capital
Supplier knowledge
Abeysekera and Guthrie (2005)

Business partnering (business collaboration,
licensing agreements, franchising agreements)
Market Share
Guthrie and Petty (2000), Brennan

(2001) and April et al. (2003)
139
IC sub-category might be that it contained information pertaining to issues of share capital to

employees (employee share option schemes). Fortunately, Abeysekera and Guthrie (2005) do
explain that the equity issues sub-category in their study captures equity issues relating to race,
gender, religion and disabilitynothing to do with employee share option schemes but rather
what some researchers might term equality issues. This example highlights the potential for
ambiguity and misunderstanding. In the absence of explanation and transparency, interpretations
of the findings across studies are potentially meaningless.
In a valuable development upon prior studies, Brennan (2001) reproduced annual report extracts
of IC disclosures, thus enriching the readers understanding of the nature of IC disclosures captured
by the study. Unfortunately, it is not clear in many instances which IC sub-category the disclosure had been allocated to. For example, Brennan reproduces an extract in which one company
(SupaRule plc) names five of its major customers. Relational capital includes the IC sub-category
company names, a logical sub-category for placing this disclosure (albeit company names can
refer to customers, competitors, suppliers, etc.). However, Brennan reports no incidences of disclosure under the IC sub-category company names across all companies in her sample, leaving
the reader unsure as to which sub-category this disclosure was allocated to. The explicit linkage
of annual report extracts of IC disclosures to IC sub-categories, along with comprehensive coding
rules, could substantially reduce such problems.
Abeysekera and Guthrie (2005), in the clustering of 45 IC terms into 16 IC sub-categories,
provide a degree of useful explanation in relation to the content of their IC categories. However,
through clustering, the composition of each sub-category is lost. Abeysekera and Guthrie explain
that clustering was necessary because the data in the coding framework was too descriptive
to bring analytical rigor to data interpretation (p. 156). However, there may be an alternative
justification for clustering a larger number of IC terms into fewer sub-categories. As noted by
Milne and Adler (1999), as the number of content categories in a scheme increases, the potential
for coding errors increases. They suggest that increased reliability is traded against increased
understanding of disclosures, and reliability is essential to permit replicable and valid inferences
to be drawn from data derived from content analysis (Milne & Adler, 1999, p. 238). However,
the use of too few coding categories increases the likelihood of random agreement in coding
decisions which may result in an overestimation of the measures used to assess reliability (Milne
& Adler, 1999). Consideration of the potential impact of the number of IC sub-categories used
on these issues is not apparent in prior IC studies.
There are two reliability issues when using content analysis to investigate disclosures (see
Milne and Adler, 1999, for an in-depth discussion). First, the coding instrument needs to be
reliable in terms of well-specified decision categories and decision rules, to facilitate consistent coding decisions across time and researchers. Second, consistent coding decisions need
to be demonstrated through the use of multiple coders, multiple time periods, and by reporting and addressing any inconsistencies. Reliability issues do not appear to be addressed in the
majority of IC disclosure studies to date (see Table 3). Coding instrument reliability is only
acknowledged by Bozzolan et al. (2003), who state that explanatory notes on the content of
each category item and examples of sentences were prepared and discussed before analysis.
Without being privy to these notes and examples, reliability is still difficult to judge. However,
Bozzolan et al. (2003) do demonstrate consistent coding decisions through the use of multiple coders, coding at alternative time periods and by reporting inconsistencies. Apart from
Guthrie and Petty (2000), who mention that a second researcher independently confirmed the
coding of a first researcher, the consistency of coding decisions is not mentioned in prior IC
studies.
140
3.2. Manual versus electronic searching

With one exception, prior studies have manually analysed annual reports for IC information,
which has inevitably restricted the sample size due to the labour-intensive data collection process. Bontis (2003) introduced a different approach by performing an electronic search on 38 IC
keywords for a large sample of 10,000 Canadian companies. Minimal levels of disclosure were
foundonly 74 occurrences by 68 companies! Although words have the advantage of being categorised more easily and large databases can be scanned for specific words (Gray et al., 1995),
there are problems in using electronic word searches to investigate IC disclosure. Weber (1990)
highlights the problems with synonyms and words with multiple meanings when using frequency
word counts. Expanding the number of keywords and a keyword in context (KWIC) search would
reduce, but not eliminate, these problems. The use of pronouns (words used instead of nouns to
indicate something without naming it) also creates problems when identifying keywords. Milne
and Adler (1999) discredit an electronic keyword search method when noting that understanding of disclosures is best achieved by consideration of whole sentences, with individual words
unlikely to convey much meaning. Moreover, a keyword search is unlikely to detect IC disclosures expressed in company-specific terms. An example would be an electronic search on the
term company names, which is unlikely to identify specific company names.
3.3. The annual report material analysed
Prior studies are generally silent or vague about exactly what parts of the annual report are
analysed. Possibilities include the entire annual report, including notes to the accounts; the front
end of the annual report; or selected sections from the front end, such as the chairmans statement, CEO review or MD&A/OFR. Several studies note that they analyse voluntary disclosures
onlypresumably this includes all sections of the annual report although this is not made clear.
In general, therefore, the population (i.e. the set of units being studied) is not carefully defined.
This creates interpretation difficulties as findings across studies relate to unknown and potentially
different populations.
3.4. The volume of disclosure: presence/absence versus count of occurrences (with/without
repetition)
The importance attached by a reporting entity to different categories of information is assumed
to be reflected by the extent of information disclosed (Krippendorff, 1980). This is the fundamental
premise of content analysis. Detecting the presence or absence of a particular item does not
capture the volume of disclosure of that item. However, recording the presence or absence of each
item against a predetermined check list does enable the range (i.e. variety) of disclosure to be
compared across reporting entities. To capture the volume of disclosure requires a count of the
number of times each item on the checklist occurs. Guthrie and Petty (2000) appear to document
only the presence or absence of information pertaining to each IC sub-category for a particular
company (i.e. two different pieces of information relating to the same IC sub-category would
count only once). However, the precise detail of the content analysis research method adopted
is, unfortunately, not transparent as no reference is made to multiple disclosures. Both Brennan
(2001) and April et al. (2003) appear to follow suit, with only the latter explicitly stating that
IC sub-categories were mentioned multiple times in the reports they analysed, but the number of
occurrences was ignored on the basis of disclosures being mostly repetitions (i.e. duplications).
141
Recording only that an IC sub-category is mentioned at least once is a very partial analysis of
the amount of IC disclosures in corporate annual reports. Different pieces of information relating
to the same IC sub-category are ignored. Hackston and Milne (1996) highlight that a simple
presence/absence approach may be misleading as it treats a company making one particular
disclosure as equal to one that makes 50 disclosures. The extent to which IC disclosures are
repeated is also of interest. It is common for the same information to appear in different sections
of annual reports. While this introduces redundancy, repetition is a communication strategy used
for emphasis and reinforcement and signals the importance placed by management upon these
messages (Beattie & Jones, 2001; Lothian, 1976).
Bozzolan et al. (2003) claim to replicate the Guthrie and Petty (2000) study for a sample
of Italian companies. Indeed, they make a direct comparison between the findings of the two
studies and conclude that, on average, Italian companies disclose more IC information than those
in Australia. This result was described by the researchers as unexpected, given Guthrie and
Pettys sample comprised Australias largest listed companies and a company held as an example
of best practice in the field of IC reporting. Explanations are offered in terms of recent Italian
initiatives leading to increased attention to IC and an analysis based on reports published 3 years
on from Guthrie and Petty for companies where IC categories are structurally higher. However,
an additional explanation is that the findings are simply not comparable, given that Bozzolan et
al. (2003) appear to have recorded multiple disclosures (albeit not repetitions) whereas Guthrie
and Petty (2000) do not.
3.5. Location and type of IC disclosure
According to Gray et al. (1995), there is no single, unique choice why any particular disclosure
location in the annual report should be preferred. However, the location of IC disclosure in the
different sections of the annual report may be informative in terms of, for example, the importance
attached to the information, reader attention and auditor confirmation. Analysing the different subcategories of IC information found in the same location may be useful in identifying underlying
relationships within the IC concept. However, there are interpretation problems in relation to
repeated information and similar information which might be legitimately expected to appear in
several sections of the annual report (Gray et al., 1995). There is a lack of consideration in relation
to the location of IC disclosures in prior studies. For example, results reported by Guthrie and
Petty (2000) contain no reference to the location of disclosures despite an indication in the paper
that this information was recorded.
Investigating only the volume of disclosures is potentially misleading when it is the credibility
or quality of disclosure that is important (Toms, 2002). Further, content analysis measuring the
volume of disclosures may be insufficient for the purposes of identifying underlying relationships
(Hasseldine, Salama, & Toms, 2005). A quality-adjusted method of content analysis is suggested,
in which disclosures are counted but also weighted to reflect their likely significance (Hasseldine
et al., 2005).
Prior studies have investigated the type of IC disclosure, mainly in terms of whether the
disclosure is quantitative or qualitative. Guthrie and Petty (2000, p. 247) found that nearly every
instance of reporting involved the intellectual capital attribute being expressed in discursive rather
than numerical terms. Bozzolan et al. (2003) introduce a weighting scheme in the development
of their IC disclosure index by counting qualitative disclosures as 1 and quantitative disclosures
as 2. This is intended to proxy the quality of disclosure. According to Toms (2002), in the
context of CSR disclosures, it is difficult for competitors to imitate quantified disclosures. He also
142
suggests that quantified disclosures are more likely to be accurate and represent actual activities.
However, the linking of quality with quantitative information might be inappropriate in the IC
context. Guthrie and Petty (2000) highlight the difficultly involved in trying to quantify IC, when
in many instances it is a qualitative item. They suggest that many companies are interested in
understanding where real firm value lies rather than assigning monetary amounts. This would
appear to suggest that in the absence of quantitative disclosures, qualitative disclosures require
close attention in the IC context. The quality or significance of qualitative IC disclosures does
not appear to be discussed in prior studies. Toms (2002) suggests that rhetoric and non-verifiable
disclosures should carry less weight as they can be made in large volume without commitment. It
is not clear whether prior IC studies screen out these disclosures in the coding process (i.e. they
are not included in the IC count), or whether they are included and given the same weight as more
informative, higher quality disclosures.
Abeysekera (2006) notes that the majority of prior IC disclosure fail to consider the possible
existence of intellectual liabilities. Abeysekera and Guthrie (2005) acknowledged and incorporated both IC assets and liabilities in their study by using a coding system of 1 for intellectual
liabilities, 0 for no IC information, and +1 for intellectual assets. However, it is not transparent
how qualitative disclosures were categorised into asset and liability types, i.e. what constitutes
an intellectual liability. Unfortunately, there appears to be no mention of the extent and nature
of intellectual liability disclosures found. It is, therefore, not clear whether any intellectual liabilities were disclosed or not. A lack of intellectual liability disclosure might justify the lack of
consideration to intellectual liabilities in prior studies.
3.6. Unit of analysis and unit of measurement
Using content analysis to investigate IC disclosure involves deciding what should form the
basis for coding (unit of analysis) and what should form the basis for measuring the amount of
disclosure (unit of measurement). Milne and Adler (1999) suggest that sentences are the most
reliable unit of analysis. On this basis, each sentence in the annual report would be analysed to
determine if it provides an IC disclosure (or not) and, if so, to which IC sub-category it relates.
A comparison of coding decisions made between multiple coders can then be used to establish
reliability. Coding sentences would appear relatively straightforward if sentences containing IC
disclosures referred to only one sub-category of IC information. However, information pertaining
to different IC sub-categories could well be disclosed within the same sentence. In this situation, a
decision has to be made in relation to the dominant IC sub-category. Additional coding rules would
be required in order to identify dominant themes. Alternatively, the unit of analysis becomes parts
of sentences or words. This problem is accentuated if paragraphs or areas of pages are used as the
unit of analysis, as the likelihood that different sub-categories of IC information are discussed is
increased.
Beattie, McInnes, & Fearnley (2004a, p. 32, 2004b), in their detailed analysis of annual report
narratives, frequently found it necessary to split sentences into text units, each group of words
containing a single piece of information that was meaningful in its own right. The extract in
Brennan (2001) cited above is a good illustration of this issueit could be argued that the names
of five customers could be classed as five separate pieces of information. In using text units as
the unit of analysis, each piece of information in a sentence is coded based on the context of that
sentence. Milne and Adler (1999) discredit the coding of single words on reliability grounds as
they have no meaning to provide a sound basis for coding without a sentence or sentences for
context.
143
According to Unerman (2000), the use of sentences along with words and characters is partial
in that it will only capture narrative disclosures. Other visual forms of communication such as
graphs, tables and pictures have been found to provide an immediate and effective means of
disclosure in corporate annual reports (e.g. Beattie & Jones, 1992; Graves, Flesher, & Jordan,
1996; McKinstry, 1996). This appears to suggest that coding should also be applied to these
non-narrative forms of disclosure. For example, the disclosure reproduced in Fig. 1 concerning
employee satisfaction (a component of human capital) (taken from EMAP plcs 2004 annual
report) would not be fully captured by an analysis of only narrative forms, even if the captions
were included. In a recent study of pictures contained in the annual reporting documents of the top
100 UK listed companies, it has been found that approximately 94% of pictures communicated
intangible aspects of companies businesses (Davison & Skerratt, 2007, p. 9).
The choice of unit of analysis has reliability implications. In order to measure the reliability
of coding decisions (with calculations such as Krippendorffs , for example) the total number
of coding decisions each coder makes and the coding outcome of each decision is required to be
known (Milne & Adler, 1999). If the unit of analysis is words, sentences, paragraphs or pages
then there is no dispute over the number of coding decisions to be made. The number of coding
decisions simply equates to the number of words, sentences, paragraphs or pages contained in
the document being analysed. However, the use of text units involves a multi-stage process. First,
all the sentences would need to be coded as containing an IC disclosure or not. At this stage,
the number of coding decisions would equate to the total number of sentences. Second, all the
sentences agreed to contain IC information would need to be coded in relation to how many pieces
of information they were thought to contain. At this stage, the number of coding decisions would
be equal to the number of sentences agreed to contain IC information. Finally, all the agreed
pieces of information would need to be coded to an IC sub-category. At this stage, the number of
coding decisions would be equal to the agreed number of IC information pieces.
The unit of measurement is also an important consideration as one of the key assumptions underlying content analysis is that volume signifies the importance of items being disclosed (Unerman,
2000). Milne and Adler (1999) advocate that each coded sentence should count as one disclosure,
i.e. sentences form the basis for both coding and measuring. However, in addition to the issue of
multiple IC sub-categories discussed above, this ignores the fact that sentences vary in length and
in the extent of IC information they contain. Grammatical differences might result in the same
message being conveyed using a similar number of words, occupying a similar amount of annual
report space but using a different number of sentences (Unerman, 2000). Counting the number of
words in each sentence could solve this problem. However, in doing so it creates problems of its
own when determining which individual words are IC disclosures and which are not (Hackston &
Milne, 1996). Beattie et al. (2004a) used their text units for both coding and measuring narrative
disclosures. Measuring sentences, words or text units fails to capture differences in font choice,
size, boldness, etc., which could all be used to stress the importance of the item being disclosed.
Unerman (2000) suggests measuring proportions of pages as a solution to grammatical differences,
font size and non-narrative disclosures. However, differences in print sizes, column sizes and page
sizes across annual reports could render comparisons across companies on the basis of page proportions unreliable (Ng, 1985, cited in Hackston & Milne, 1996). Further, boldness or emphasis
through colour in both non-narrative and narrative disclosures would still not be captured.
Choices regarding unit of analysis and unit of measurement do not arise in the prior IC studies
which ignore multiple disclosures and focus merely on presence/absence. In the other studies,
Bozzolan et al. (2003) chose sentences as the unit of analysis and measurement. The choice made
in Abeysekera and Guthries (2005, p. 157) paper is not clear: they state that in the word count
144
Fig. 1. IC disclosure from EMAP PLC 2004 annual report.
145
category, the method of counting lines (sentences) was chosen as the context unit instead of word,
paragraph or page. They go on to highlight the benefits of sentences as the unit of analysis and
also say that line count methods provide a more appropriate starting point from which to convert
charts, tables and photographs into equivalent lines for comparison. This appears to infer that
lines and sentences are the same, when this is not the case as one sentence may span several lines,
and one line may contain more than one sentence. An added problem is that annual reports vary
in the number of columns per page; line counts will be inflated where multiple columns exist.
In the next section, Next plcs 2004 annual report is used to illustrate some of the above issues.
It is pertinent to stress that this analysis was undertaken solely for the purpose of highlighting the
specific problems when using content analysis. It does not claim to provide an assessment of the
extent and nature of IC disclosure by Next plc. Moreover, the coding procedures adopted are not
claimed to be ideal or even the best and do not offer a solution to all the issues involved.
4. Analysis of IC disclosuresan illustrative example: Next plc
4.1. Choice of illustrative example
Next plc (2004 annual report) was chosen on the basis of its high market-to-book ratio. The
original IC definition used in the US was the difference between a firms market and book values
(Stewart, 1997, quoted in Chaminade & Roberts, 2003, p. 746). Similarly, Edvinsson (1997), the
former director of IC at Skandia, defines IC as overall value less financial capital. In an analysis
based on the FTSE 100 companies in 2002/2003, Next plc exhibited the third highest market-tobook ratio (8.21) (Beattie & Thomson, 2005). As noted in the introduction, the difference between
market and book values can result from factors other than unrecorded intangible assets. Brennan
(2001) highlights factors such as unrealistic tangible balance sheet assets and fluctuating daily
share prices causing market-to-book ratios to be unreliable short-term measures of IC. Fig. 2
shows the trend in market-to-book ratio for Next plc over the 18-year period 19852003. The
consistently high ratio in recent years indicates that fluctuating daily share prices are an unlikely
influence. In addition, Next plc operates in the retail industry which is characterised by relatively
standardised tangible assets, minimising the problem of unrealistic tangible balance sheet values.
4.2. Approach taken to illustrate specic issues
Following Beattie et al. (2004a), the unit of analysis and the unit of measurement was the
text (or table) unit. The use of text (table) units is not offered up as the perfect solution in the
Fig. 2. Next plcs market-to-book values: 19852003.
146
use of content analysis. It is more complex than the use of sentences, and increased complexity
has the potential to decrease reliability. However, reliability can still be measured when using
text units, and it has the following advantages: it enables the extent to which different categories
of IC information are disclosed to be investigated; it avoids making decisions in relation to the
dominant IC category disclosed in each sentence; and does not exclude the IC information which
is less dominant.
The entire content of the annual report (excluding financial statements) was manually analysed
to identify IC information. Each sentence, headline and table (there was no pictorial material) was
classed as containing IC information or not. IC information identified in the form of sentences,
headlines and tables was then split into text units (pieces of information provided) and coded to
IC sub-categories obtained from a review of the literature by Beattie and Thomson (2004) and
shown in Table 2. This list is not definitive; typically researchers have subsequently modified their
IC frameworks (e.g. Abeysekera & Guthrie, 2005). However, it provides a relatively extensive
base from which to identify IC disclosures and takes a broad view of the IC concept for the
purpose of illustration.4 It is recognised that an increase in IC sub-categories potentially decreases
inter-coder reliability (Milne & Adler, 1999); hence this illustration does not claim to reliably
report the extent and nature of IC disclosure made by Next plc. In analysing disclosures, relevant
information was identified which did not fit into the original set of sub-categories. According
to Gray et al. (1995) this is a common situation and it would be inappropriate to ignore such
information. Consequently, in this situation, new sub-categories were created and existing subcategories modified (described below). Coding rules were developed after an initial analysis of the
information disclosed. Text/table units were coded based on the context in which they appeared
(i.e. within a sentence, headline or table). Coding was undertaken by one of the authors and
verified by the other author. An electronic word search of Next plcs 2004 annual report in pdf
format using Adobe Acrobat was also conducted.
4.3. Concept boundary problems
Inevitably, the volume and nature of IC disclosure found is a product of the various coding
rules adopted and the subjective judgement of the coder in applying them. However, increasing the
transparency of the methods applied facilitates comparisons across studies. For example, what is
to count as employees? Is it all human assets receiving remuneration from the company or should
a distinction be made between the board of directors and other employees? The composition of
individual boards of directors undoubtedly impacts in varying degrees on the success or otherwise
of a company. Adopting a broad view of the IC concept in this illustration, the information
concerning directors (executive and non-executive) and employees was included.
During an initial analysis of Next plc, a considerable amount of information was found in
relation to employee remuneration. This sub-category had not previously been identified from the
literature (Table 2). Should all remuneration information be classed as IC? An argument for this
can be made on the grounds that remuneration procedures influence the attraction, retention and
satisfaction of employees and hence the value of human capital. Subsequently, this information
was recorded in a new sub-category termed remuneration procedures for the purposes of this
4 It is worth noting that some simplification in inherent in all classification systems, otherwise all that is produced is a
description of reality which serves little purpose. Classification systems can be created at various levels of aggregation
and may focus on different attributes. The suitability of any given classification system depends upon the purpose for
which it was created.
147
illustration. Abeysekera and Guthrie (2005) appear to have also taken the same view as they
include employee compensation plans, employee benefits and employee share option ownership
plans in the IC sub-category employee welfare. However, in the analysis of Next plc remuneration
procedures were considered as structural capitalinternal procedures to attract, retain and satisfy
human capital, independent from the human capital itself. Abeysekera and Guthrie (2005) adopt a
different perspective by considering employee welfare to be part of human capital. Alternatively,
other researchers could decide that the remuneration procedures disclosed across companies
were sufficiently similar not to warrant inclusion in any IC category. The potential for adopting
alternative perspectives is evident, as is the essential need for transparency to compare findings.
Adopting a broad view of IC, 906 pieces of IC information were identified in Next plcs 2004
annual report. This information was coded across 20 sub-categories of human capital, 16 subcategories of structural capital and 23 sub-categories of relational capital, as shown in Table 5,
columns 1 and 2. In this table, a subjective, summary description of the nature of IC information
pertaining to each IC sub-category is offered in column 3. The final column identifies possible
alternative classifications and serves to highlight the difficulty involved in allocating information
to only one category. For example, the following sentence could be categorised as providing
information in relation to either human capital or as procedures, part of structural capital:
The Group has developed policies for recruitment, training and development of personnel.
[Source: Corporate Social Responsibility Statement, p. 16].
Similarly, the following sentence could be categorised as either corporate culture or management philosophy:
The Board promotes the development of a strong control culture within the business.
[Source: Corporate Governance, p. 14].
In this example, both sub-categories relate to structural capital, so perhaps the clustering of a
large number of sub-categories into a smaller number of sub-categories (i.e. corporate culture and
management philosophy information contained in the same sub-category of structural capital) as
advocated by Abeysekera and Guthrie (2005) would eliminate the problem.
For the data in columns 1 and 2 in Table 5 to be meaningful, researchers need to develop and
report comprehensive coding rules and give examples of information allocated to each IC subcategory. To illustrate, Fig. 3 reproduces an annual report extract in conjunction with the relevant
coding rules adopted and the IC content identified.
4.4. The annual report material analysed
The Remuneration Report contained the most IC information (21.3%), mainly in relation to
competitors/competitor names, expert teams, remuneration procedures and staff profile. A significant amount of IC information (20.4%), predominantly relating to components of relational
capital, was found in the Chief Executives Review. Smaller numbers of IC disclosures were evident in the Chairmans Statement (2.8%), the Corporate Social Responsibility Statement (7.6%),
and the Directors Report (8.3%). It is clear that many IC disclosures are found in sections of
the annual report that are subject to mandated requirements (e.g. Directors Report, notes to the
accounts). It is, therefore, vital that the boundaries of the material being analysed are clearly
defined and not drawn too narrowly, otherwise comparisons across studies are impossible and IC
disclosures could be missed.
148
Table 5
Manual content analysis of Next plcs 2004 annual report: Occurrence frequency and nature of IC information
IC Sub-Category
Frequency
Panel A: Human capital

Employee attitude
Employee capability
Employee commitment
Employee
communicative
activities
Employee development
32
Employee experience
28
Employee motivation
Employee sensitivity
Employee skills
Equality
10
Expert teams
74
Human assets
Productivity
1
2
Recruitment
Nature of information
Enthusiasm of all employees (repeated

twice). One non-executive director
described as having an independent
approach, being probing and persistent.
Another described as having a common
sense approach
Strength of management team. Two
board members are eligible for
reappointment
Dedication of all employees (repeated
twice). Two board members willing to be
reappointed
Giving employees group information.
Taking into account employee views and
suggestions. Frequency and nature of
board meetings. Open discussions and
regular information provided to
directors. Next brand trading meeting.
Frequency of Audit Committee,
Remuneration Committee and
Nomination Committee meetings
Developed policies for development of
personnel.
Previous positions held outside Next by
directors and officers. Ranging from
marketing experience, accounting
experience to experience working in
particular companies
A well motivated management team
One of the non-executive directors

described as having a thoughtful way
Skilled management team. Design skills
can add value in developing and
extending product range
Statements in relation to disabled
employees, equal opportunities, no
discrimination, equal pension rights for
members of either sex
Remuneration and nomination
committees: members and function.
Operational management. Auditor team
re supplier compliance. Responsibility
for central treasury function
People area key asset to the business
Objectives and targets set for the chief
executive
Another non-executive director required.
Policies in place for recruitment
Alternative
categorisation
Recruitment/staff
turnover
Recruitment/staff
turnover
Expert teams/brands
Structural capital
(procedures)
Staff profile/work
related competencies
Employee
attitude/employee
commitment
Employee attitude
Taking responsibility/
organisational
structure
Structural capital
(procedures)
149
IC Sub-Category
Frequency
Alternative
categorisation
Staff profile
90
Staff turnover
Staff turnover
20
19
Positions held: who holds them, duration,

age profile. Directors ages and service
years. Staff numbers, average per Next
brand, Ventura and other and full time
equivalents
Retirement and length of service.
Termination notice and turnover in board
members
By particular people or groups including
the chief executive and the board
Policies developed for training
Training
Work-related
competencies
Work-related
knowledge
Total
Panel B: Structural capital
Internal communicative
activities
Corporate culture
1
17
Structural capital
(procedures)
Current positions held outside Next by

directors and officers. Non-executive
directors bearing considerable judgement
Non-executive directors bring
considerable knowledge
315
1
1
Customer support
Financial relations
Financial strategy
21
Infrastructure
22
Innovation
Management
philosophy
Expert teams
15
Operation process
Organisational
flexibility
Significant risk issues are referred to the

board
Board promotes a strong control culture
The majority of the increase in Venturas
profit came from customer service
activities
Bankers and stockbrokers. Investments of
cash surpluses with bank and companies
which fulfil credit ratings and investment
criteria. Board role is to represent and
promote interests of shareholders
Use of debt and share buybacks. Use of
capital. Borrowing terms, managing
interest rates, hedging, interest rate swaps,
options, forward rate agreements
Warehousing and call centres. Investments
in additional capacity. Sourcing
companies
Trailing a wedding list service
Style, quality and value of ranges remain
highest priority. The product is believed to
make the brand successful
Risk management process. Process of
commission of CSR report
Increased operating efficiency. Highly
mechanised warehouse
Increased number of customers who are
able to use directory accounts to make
purchases in store. Using treasury shares
to satisfy employee share options
Procedures
Management
philosophy
Markets
(relational capital)
Brands
Social matters
Infrastructure
Customers
(relational capital.)
Financial strategy
150
IC Sub-Category
Organisational
structure
Procedures
Quality improvements
Remuneration
procedures
Systems
Total
Frequency
2
10
137
Alternative
categorisation
Division of responsibilities between

offices of chairman and chief executive.
Groups management structure
Business continuity plans. Expense
claims. Safety and Ethical
responsibility of Suppliers. Minimising
Risk. Health and Safety
Style, quality and value. Better
sourcing and selection. Improved stock
availability. Reduced product return
rates
Detailed rules in relation to: share save
employee option scheme; remuneration
packages of directors; how salaries are
set; bonus schemes; pension schemes;
directors benefits
Internal control
240
Panel C: Relational capital

Brands
13
Client names
Client profile
Collaborations
Community
1
12
Competitor names
27
Competitors
Customer knowledge
Turnover, operating profit, earnings per

share for 2004 and 2003 for the Next
brand. Sales increase. Staff costs for
the Next Brand
Choicean associated company which
operates a chain of 13 discount stores.
Cotton Traders an associated
company selling its own brand product
Pension Credit Services and British
Gas
Ventura commenced providing service
on behalf of several new clients.
Increased demand from existing and
new clients. Good progress in
broadening client base. Winning new
clients
Working in partnership with suppliers
Charitable donations. Corporate and
charity sponsorship programme.
Committee of employee
representatives to ensure diverse range
of charitable causes supported
List of 20 comparator companies. JJB
sports, Arcadia, Debenhams and
Selfridges removed, replaced by
Burburry, Signet and Woolworths
Comparator group most comparable in
terms of size or nature. Total
shareholder return of Next ranked
between fifth and sixth compared to the
group of 20 other retailers
Understanding of our customers
Company names
Company names
Suppliers
Company names
Customers
151
IC Sub-Category
Frequency
Alternative
categorisation
Customer satisfaction
11
Customers
Customers
12
For customers: products of good quality

and value; Improvements in value;
greater choice; more comfortable
shopping environments; improved and
expanded store based services for
directory customers; competitive prices;
purchase and return in the way which is
most convenient
Active customers, growing the base,
growth expectations, account balances
for directory customers
Stores and Next Directory (Home
Shopping)
Waste stream management. Recycling
procedures
Ethical trading
Communication through annual reports,
yearly and half yearly announcements,
regular trading updates to stock
exchange. Company website,
opportunities at AGM, shareholders
views included in board reports
Borrowing requirements and terms
share for 2004 and 2003 for the Next
Franchise. Number of franchise stores in
Middle East, Japan. Success in Iceland
share for 2004 and 2003 for geographical
sales regions
Development of product ranges
Re-negotiation of Venturas contract at
lower margins
Social responsibility. Health, safety,
welfare and fire prevention
Substantial shareholder information
Support of suppliers, improvements,
payment, sources, supplier code of
practice
106
Environmental
activities
Ethical matters
External
communicative
activities
8
5
11
Financial contracts
7
33
Market channels
40
Market intensity
Negotiation
1
1
Social matters
18
Stakeholders
Suppliers
15
15
Total
Structural capital
Shareholders
351
4.5. The volume of disclosure

The use of presence/absence of an IC sub-category does not capture the volume of IC information being disclosed. Of the 59 IC sub-categories identified as having at least one IC disclosure, 45
had multiple disclosures. Only 3.3% of IC information was repeated. Given the relatively small
occurrence of repeated disclosures, their treatment may not be a critical issue. The maximum
number of disclosures for a single sub-category was 137 in relation to remuneration procedures.
If multiple disclosures were ignored, neither the absolute nor the relative volume of information
152
Fig. 3. IC extract and analysis 1.
provided about remuneration procedures would be captured. Ignoring multiple disclosures also
fails to capture different IC disclosures relating to the same IC sub-category. For example, six disclosures were found relating to employee attitude: all staff were said to be enthusiastic (repeated
twice), a particular member of staff was said to maintain an independent, probing and persistent
approach (counted as three disclosures) and another member of staff was said to have a common
sense approach.
4.6. Type of IC disclosures
In this illustrative study of Next plc, two type attributes were recordedwhether the disclosure was quantified or non-quantified and whether it was a fact (capable of verification) or
judgement (unsubstantiated statement) (Beattie et al., 2004a, p. 31). For example, the following
sentence, coded as an IC disclosure in the distribution channels sub-category, was recorded as
both quantified and factual:
153
This years portfolio of new space is exceeding its appraised sales target by 12% [Source:
Chief Executives Review, p. 4].
The following example, coded as an IC disclosure in the franchising agreements sub-category,
was recorded as neither quantified nor fact. As Next plc failed to define success, the statement
represents an unsubstantiated judgement.
The success of our franchise in Iceland [Source: Chief Executives Review, p. 5].
The claimed superiority of quantified disclosures over non-quantified disclosures has been
previously noted. Almost all quantified disclosures were also recorded as factual and could thus
be considered as higher quality IC disclosures. However, although the following example of IC
disclosure in the distribution channels sub-category was recorded as quantified, it is based on
company expectations and thus it is considered a company judgement:
We currently expect to increase net selling space by around 420,000 square feet in the year
ahead. [Source: Chief Executives Review, p. 5].
In weighting disclosures, researchers need to consider how the quality of a quantified judgement
compares with a non-quantified fact. The following example was recorded as a non-quantified
fact in the work-related competencies sub-category, as the duration these positions have been
held for is not disclosed.
He (the chairman) is also a non-executive director of Aggregate Industries plc and Leicester
Football club plc. [Source: Directors and Officers, p. 9].
In this example, it is the duration which adds quantification to the disclosure. However, whether
in this example, quantification would add further value to the disclosure is debatable. If the
chairman is disclosed as having held these positions for a length of time, it could imply that his
related long-term experience may be of value to his current position with Next plc. If he has just
been appointed in these positions, it could imply that his experience is limited and, therefore, of
little benefit to his position with Next plc. Irrespective of the length of related experience, it is
difficult to judge the extent to which it will contribute to Next, if at all.5 This example highlights the
subjectivity and difficulty involved in pinpointing which disclosures are more informative/valuable
and in weighting disclosures.
Recording IC disclosures on the basis of quantified/non-quantified and fact/judgement fails to
fully capture the significance of the disclosure. The following two examples were both recorded
as non-quantified judgements. However, the former does provide a degree of future intentions,
whereas the latter is more a sweeping statement, of the form which Toms (2002) refers to as
general rhetoric.
. . .advancing the underlying operating prot of the Next Group will mainly be achieved
through. . ..expansion of our selling space [Source: Chief Executives Review, p. 4].
The success of Next owes so much to the strength and skills of a well-motivated management
team. [Source: Chairmans Statement, p. 2].
In the analysis of Next plc, approximately half of the information found (51%) was quantified
and 68% was factual. Approximately 33% was neither quantified nor factual. Measuring and
5
Hackston and Milne (1996, p. 108) propose that all coding be based on stated (and not implied) disclosures.
154
comparing IC disclosures on the basis of volume offers a partial view. The weighting of different
types of disclosure requires consideration. Perhaps their quality could be assessed and recorded
in terms of how useful the disclosure is for decision-making? To take account of IC disclosure
type, further coding rules are required. In the CSR literature this has led to the use of multiple
digit codes in content analysis. For example, Hackston and Milne (1996) suggest a four digit
code in relation to CSR disclosures. The first digit records the existence of a CSR disclosure, the
second digit records the category of disclosure, the third digit records the type of disclosure and
the fourth digit records whether the disclosure is good, bad or neutral news. They suggest that
the use of multiple digit codes facilitates the recording of coding decisions and permits formal
reliability calculations to be performed. This method would also permit the type of disclosure by
category to be analysed.
4.7. Unit of analysis and unit of measurement
Coding and counting text units (parts of sentences capturing a piece of information) avoids
the problem of coding sentences which contain different sub-categories of IC information. For
example, consider the following sentence:
The success of Next owes so much to the enthusiasm and dedication of our employees and
the support of our suppliers [Source: Summary of Performance, page 1]
Using the text unit approach, this sentence provided three pieces of information: Next attributes
success to enthusiastic employees, Next attributes success to dedicated employees and Next
attributes success to the support of suppliers. This sentence was coded as two pieces of information relating to human capital (employee attitude and employee commitment) and one piece of
information relating to relational capital (suppliers). Although sentences are broken down according to how many pieces of information they contain, and each piece of information is allocated to
a sub-category of IC information, the piece of information remains in the context of the sentence
throughout this process. In the example above, enthusiastic employees, dedicated employees and
supplier support were all categorized in the context of what the success of Next is being attributed
to. If this sentence were coded to one IC sub-category, i.e. if sentences were used as the unit of
analysis, a dominant sub-category would need to be identified. The sentence refers to employees
(human capital) and suppliers (relational capital). If human capital were chosen, then a further
decision would need to be made in relation to sub-category, in this case attitude or commitment
(although this decision could be eliminated if one sub-category represented both attitude and
commitment). Without quantifying the pieces of information contained in the sentence (i.e. two
pieces about employees, one about suppliers, so employees dominate on the basis of volume),
how would the coder decide the dominant theme? Would employees dominate because they are
mentioned first before suppliers in the sentence or would the choice depend on the coders perceptions/intuitions of what is more important? Whatever category is chosen to dominate, the
disclosure in relation to the other is lost.
Across all the material analysed, 18.1% of the IC disclosures found were in table format,
leaving 81.9% in text format (including 3.9% list items). Coding text units facilitated the inclusion
of IC information provided in forms other than sentences, as shown in the examples contained in
Figs. 46.
The 906 pieces of IC information identified were spread across 260 sentences identified as
containing IC information, indicating the major impact that the choice of unit of analysis and unit
of measurement can have on the volume of IC disclosures identified. In this illustration, there
155
was no use of colour (in text or pictorial format) and only 2% of IC text was emphasised in
bold headline format. However, as colour and headlines are prominent features in many corporate
annual reports, this use of emphasis could still be captured when analysing text/table/visual units
by including additional type attributes.
4.8. Manual versus electronic searching
In total, 105 IC terms were electronically searched for after removing 23 synonyms from the
list in Table 2. Thirty-five of these terms were found in Next plcs 2004 annual report, while 70
generated a zero count (Table 6). The total frequency count across the 35 terms was 264, only
29% of the total number of information items obtained from the manual search. On the basis of
quantity of information found, the electronic search is inferior. Further problems were revealed
156
157
Table 6
Electronic content analysis of Next plcs 2004 annual report
Search terms
Employees
Knowledge
Commitment
Communicative/communication
Development
Productivity
Teams
Training
Experience
Personnel
Recruitment
Skill
Responsibility
Staff
Culture
Processes/process
Operations
Flexibility
Structure
Procedures
Quality
Research
Systems
Strategy
Brands
Customers
Franchise/franchising
Clients
Commercial
Competitive/competition
Environmental
IC category
HC
HC
HC
HC/SC
HC
HC
HC
HC
HC
HC
HC
HC
HC
HC
SC
SC
SC
SC
SC
SC
SC
SC
SC
SC
RC
RC
RC
RC
RC
RC
RC
RC
Total
hits
39
1
12
4
20
1
3
3
16
2
2
2
11
6
1
8
11
1
3
8
5
1
3
1
12
25
1
8
4
2
2
4
KWIC review
Pieces of KWICverified IC
information from search term
IC Hits
Not IC Hits
HC
SC
RC
23
1
1
3
7
1
2
3
11
2
1
2
4
3
1
8
6
1
3
3
4
1
3
1
10
19
1
7
4
0
2
4
16
0
11
1
13
0
1
0
5
0
1
0
7
3
0
0
5
0
0
5
1
0
0
0
2
6
0
1
0
2
0
0
24
1
12
2
4
1
3
1
6
2
22
1
2
2
1
2
5
2
1
2
8
1
2
1
1
2
1
1
9
1
1
1
4
2
1
1
1
2
2
2
1
2
17
24
1
17
5
1
1
4
when a keyword in context review was undertaken to confirm the IC content. Of the 264 terms
found, 107 (40%) were judged to have no IC content, and may be described as false hits.
This may appear to suggest that, excluding false hits, only 17.3% of IC information identified
in the manual analysis was captured by the electronic search. A mitigating factor, however, is that
in some cases one electronic hit provided more than one piece of IC information. For example,
experience (one hit) was located in the following sentence:
Previous experience includes twenty years in a large home shopping and consumer services
group and ve years as Chief Executive of a UK home shopping plc. [Source: Directors
and Officers, p. 9]
In the manual search, this sentence was recorded as providing 4 pieces of information in relation
to employee experiencetwo types of experience for two time periods.
158
The electronic search terms used related to the three IC categories of human capital, structural
capital and relational capital. However, an electronic hit on one IC sub-category was often found
to yield information relating to another. For example, markets/marketing in the relational capital
category was located twice in the following sentence:
Previous experience includes a career in advertising, marketing and market research.
[Source: Directors and Officers, p. 9]
In the manual search, this sentence provides no information in connection with relational capital
but documents employee experience, part of human capital. Findings highlight the inadequacy
of electronic searches in the investigation of IC disclosures in annual reports. They substantiate
Milne and Adlers (1999) suggestion that an understanding of disclosures is best achieved by
consideration of whole sentences. The findings of very low IC disclosure from the study by
Bontis (2003) which uses an electronic search and a limited item list now appear less surprising.
5. Summary and conclusions
IC is now acknowledged as the major contributor to the market value of many companies
operating in service and knowledge industries, yet it is generally not reflected on the balance
sheet. The opportunity exists, however, to report IC in the narrative sections of corporate annual
reports. Prior content-analytic studies have generally concluded that these sections contain low
levels of IC disclosure (e.g. Bozzolan et al., 2003; Brennan, 2001; Guthrie & Petty, 2000). This is
somewhat surprising given the theoretical motivations that companies have for disclosing IC information. However, specific issues arising in the use of content analysis to identify IC disclosures
hinder the interpretation and comparison of findings across studies. These issues include: concept
boundary problems and coding reliability; annual report material analysed; volume of disclosure;
type of disclosure; the unit of analysis and unit of measurement; and manual versus electronic
searching.
This paper highlights and illustrates the problems associated with these specific issues through
an analysis of prior studies and the use of an illustrative example (Next plcs 2004 annual report).
Next plcs 2004 annual report was manually analysed for IC information using a detailed list of
IC sub-categories (Beattie & Thomson, 2004). An electronic keyword search was also conducted
to facilitate comparisons between manual and electronic methods.
The depth and breadth of the IC concept is evident in the academic literature. The concept has
developed over time, yet the requirement of a generally agreed taxonomy of IC terms (as called
for by Zambon, 2005) has still to be met. Consequently, the identification and categorisation of IC
information using content analysis to identify IC disclosures is, at present, highly subjective. The
subjectivity in the categorisation of information found in Next plcs annual report is illustrated
in the present paper. In this context, transparency is essential for meaningful interpretations and
comparisons of findings across studies. To date there is a lack of explanation of the nature of IC
information allocated to IC categories and sub-categories in studies conducting manual content
analysis. Future studies would benefit from increased transparency in relation to the IC information
found and how it is categorised. Not only would this action help to address the problems of
comparability across IC disclosure studies (as called for by Abeysekera, 2006), but it would
also provide real practical examples of the IC concept. Through the communication of practical
examples and awareness of researchers perceptions, the IC concept would be given the opportunity
to evolve, and shared meanings the opportunity to developa necessary requirement for content
analysis to be effective (Gray et al., 1995). It would assist in the development of reliable coding
159
instruments, which in conjunction with the demonstration of consistent coding decisions would
further address comparability issues.
In the analysis of Next plc, IC disclosures were found across the various sections of the annual
report, including sections that are subjected to mandated requirements. It is essential that future
studies clearly define the boundaries of the material being analysed to permit valid comparisons.
It is important to recognise that the boundaries have a direct impact on the volume of IC found.
Multiple disclosures of IC information were evident for 45 out of the 59 IC sub-categories
identified in the analysis of Next plc, however only 3% of all disclosures were found to be
duplicates. The maximum number of disclosures for a single item was 137 in relation to remuneration procedures followed by 106 for distribution channels. If multiple disclosures are
ignored, neither the absolute nor the relative volume of information provided about remuneration
procedures and distribution channels would be captured. Thus, ignoring multiple disclosures
provides a very partial analysis of the quantum of IC information found in corporate annual
reports.
The consideration of multiple disclosures requires a decision in respect of the unit of analysis and the unit of measurement. This choice has a direct impact on the volume and nature of
IC disclosures identified and needs to be transparent for valid comparisons to be made. In the
analysis of Next plc, 260 IC disclosures were found using sentences as the unit of analysis and
measurement, whereas 906 IC disclosures were found using text units. The choice of sentences
or text units as the unit of analysis has implications for measuring the reliability of coding decisions. With sentences, the number of coding decisions to be made is straight forward, equating
to the number of sentences contained in the document being analysed. However, coding rules are
required not only to identify the sub-category of IC information concerned but also to determine
which sub-category dominates if different sub-categories are mentioned in the same sentence.
The use of text units avoids the requirement to identify dominant IC sub-categories in coding
decisions. However, in doing so it involves a multi-stage process of identifying which sentences
contain IC information, how many pieces of IC information are provided in each sentence, and
to which sub-category does each piece of IC information relate. Thus, while the use of text
units as the unit of analysis and measurement does add complexity and does involve subjective
judgement, coding of the dominant themes in sentences is also subjective. It is just a different
subjectivity. In both cases, the subjectivity can be addressed by developing comprehensive coding rules and tested by calculating measures of reliability. Clearly there is a trade-off to be made
here. Richer insights into the absolute and relative amounts of different categories of IC information are obtained at the expense of increased complexity and potentially reduced reliability.6
The choice made must depend upon the nature of the research question being addressed. Certainly further research that explores the impact of such choices on the measures obtained is
desirable.
Future studies should consider the alternative communication formats found in corporate
annual reports. In the present paper, IC information was found in standard text, headline text,
tabular and list format. Visual images were not present. The unit of analysis and unit of measurement need to accommodate these alternative formats. In the present paper, each cell in a
table and each entry in a list were taken to provide one piece of information. Counting a list of
20 competitor names, for example, as one piece of information would not appear to capture the
6 Indeed, Milne and Adler (1999, p. 242) note that . . . increased reliability is gained at the expense of potential
refinements to the understanding of social and environmental disclosures.
160
extent of information in relation to competitors provided. Considering the type of disclosure in

terms of, for example, headline/prominent information, quantified/non-quantified information,
factual/non-factual information, and the location of information could provide additional insight
into the significance and quality of IC disclosures.
Electronic searches have previously been used to investigate IC disclosures (Bontis, 2003).
The present study highlights the inferiority of electronic word searches in generating IC hits.
An electronic search of 105 IC terms generated 264 hits compared to 906 pieces of information
obtained from the manual search, and 107 of these (i.e. 40%) were found to contain no IC
content. The use of a keyword in context (KWIC) search procedure, perhaps using a thesaurus of
IC terms, would be likely to improve the reliability of this approach. The inferiority of electronic
word searches is further highlighted on the basis that one IC hit can relate to multiple pieces
of IC information. Electronic hits for particular IC sub-categories can relate to different IC subcategories within the same category of human, structural and relation capital, or to different
categories. This evidence suggests that words in isolation, either electronically or manually, do
not provide a sound unit of analysis.
It is concluded that the depth and breadth of the IC concept and the lack of common definitive
language make it difficult to establish the extent and nature of disclosure currently provided in
corporate annual reports. The range of choices available to researchers in terms of analysing and
measuring IC disclosures further hinders interpretation and comparability. Transparency in the
choices made would be a first step. Through transparency in relation to the IC information found
and how it is categorised by different researchers, shared meanings could be developed and the IC
concept better understood. This in turn could further assist in the interpretation and comparability
of findings across studies.
It is recognised that the limitations put on journal article length require researchers to be
concise in the method details they provide. Perhaps it is now time to change direction temporarily
and make the methods themselves the focus of the academic journal articles. In the few IC
articles of this type published to date, issues have mainly been discussed in the abstract. In
addition, practical experiences need to be shared. Researchers in the CSR context have already
reached this conclusion. For example, Gray et al. (1995) report on their experience of building
a database of social and environmental disclosures in an attempt to refine and develop earlier
attempts to capture and interpret such disclosures. The explicit aim was to develop shared meanings
and facilitate comparisons. Perhaps it is time for researchers in the IC context to take notice
and follow suit? Researchers need to lift the lid on their use of content analysis to investigate
IC disclosures if the problems of interpretation and comparability are to have any chance of
resolution.
The issues discussed in the present paper apply not only to the analysis of corporate annual
reports, but also to other formal documents issued by an organisation, information intermediaries
or stakeholders, as well as to informal dialogues between company representatives and interested
parties.
Acknowledgments
We acknowledge the helpful comments of participants at the 9th Annual Financial Reporting
and Business Communication Conference, Cardiff, July 78, 2005 and at the First Workshop on
Visualising, Measuring, and Managing Intangibles and Intellectual Capital, Ferrara University,
October 1820, 2005. The valuable comments received by two anonymous referees are also
greatly appreciated.
161
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Vivien Beattie published over 40 articles in refereed academic journals and 14 published research reports. Main research
interests are business reporting and the external audit market. Currently joint editor of the British Accounting Review, a
member of the Academic Panel of the Accounting Standards Board, and a member of the accounting and finance sub-panel
for RAE 2008.
Sarah Jane Thomson awarded a prestigious Carnegie scholarship to fund Ph.D. studies which examined the role of leasing
in UK corporate financing decisions, its accounting treatment and its market impact. Thesis received the Leaseurope award
for the best thesis on leasing across Europe in 2003. Main current research interests are lease accounting and intellectual
capital reporting.

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Accounting Forum 31 (2007) 129163

Lifting the lid on the use of content analysis to

Department of Accounting and Finance, University of Glasgow, 65-73 Southpark Avenue,

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Source: Meritum (2002, p. 63).

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Achieving mechanism culture

Basic marketing capability

Source: Beattie and Thomson (2004).

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

3. Content-analytic studies of IC disclosures in annual reports

Guthrie and Petty (2000)

20 listed companies (inc. 19 largest

One researcher coded the report; a

Bozzolan et al. (2003)

30 non-financial companies listed

24 IC terms across 3 categories: human

April et al. (2003)

20 largest listed companies as at

Bozzolan, ORegan, and

Abeysekera and Guthrie

30 non-financial listed companies

24 IC terms across 3 categories: human

45 terms clustered into 17 sub-categories

Used two coders; explanatory notes on

As Bozzolan et al. (2003)

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Abeysekera and Guthrie (2005)

Human capital (employee competence)

Human capital (employee competence)

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Guthrie and Petty (2000), Brennan

Bozzolan et al. (2003) and Bozzolan

Abeysekera and Guthrie (2005)

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Guthrie and Petty (2000), Brennan

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

IC sub-category might be that it contained information pertaining to issues of share capital to

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

3.2. Manual versus electronic searching

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Fig. 1. IC disclosure from EMAP PLC 2004 annual report.

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Fig. 2. Next plcs market-to-book values: 19852003.

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Panel A: Human capital

Enthusiasm of all employees (repeated

One of the non-executive directors

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Positions held: who holds them, duration,

Current positions held outside Next by

Significant risk issues are referred to the

V. Beattie, S.J. Thomson / Accounting Forum 31 (2007) 129163

Division of responsibilities between

Panel C: Relational capital

Turnover, operating profit, earnings per