DEPORTE FORMATIVO

In addition to testing the factors influencing disclosure practices in different markets, there are studies comparing the disclosure practices between markets, highlighting the differences in overall IA disclosures. For example, Abeysekera and Guthrie (2004)

Guthrie et al. (1999) and Abeysekera (2008) contributed to the literature by comparing the disclosure practices of Sri Lanka (an emerging market) Singapore (a moderately developed market) and Australia (a developed market).

Abeysekera and Guthrie (2004) examined the state of Human Capital Reporting (HCR), as demonstrated in the annual reports of the largest listed Sri Lankan firms. This allows some comparisons between Sri Lanka (an emerging market) and Australia (a developed market); thus providing the basis for speculative commentary on the differences between the two situations. A content analysis was carried out on the annual reports of 30 companies listed in the Colombo Stock Exchange. The IC information collected from the analysis of annual reports was coded separately for two consecutive years. The frequency and line count for each IC line item was aggregated for the total sample (30 companies). The frequency was determined by the number of times an IC item was described, whether qualitatively or quantitatively. Further, the „word unit‟ method was chosen out of the four available methods of counting units (word phase, theme, character and set of interactions) since it is easily identifiable in annual reports.

For the two years examined, it was found that companies in Sri Lanka demonstrated an insignificant increase in the three categories of IC reporting by the frequency and line count. The most reported category, both by frequency and line count was external capital followed by HC which was the second most reported category. The least reported category, internal capital, was reported as decreased by line count. Further, the study reported that the group of employees most featured were from senior and middle management, which, it could be argued, represents the most value-adding group of employees in the firm. Also the study reports that Sri Lankan firms invest a substantial

amount into training their work force. However, the study shows that the emphasis of this training was not to direct work-related skills but to strengthen the „soft qualities‟ of employees.

By comparing the findings of a similar study carried out by Guthrie et al. (1999) in Australia, it was reported that „entrepreneurial spirit‟ was the most frequently reported attribute of HC in Australia, as opposed to „featuring of employees‟ in Sri Lanka. In contrast, „entrepreneurial spirit‟ was one of the least reported items in Sri Lanka. Firms in Australia are at the forefront for R&D and the business culture provides incentives to encourage the entrepreneurship of employees. The cost of innovation is not an issue and the innovators in Australia have the confidence to market new products at a high initial price.

The IC disclosure practices were examined by Abeysekera (2008), by comparing firms in a moderately developed country setting (Singapore) and developing country setting (Sri Lanka). This comparative study investigated two research questions: first, whether there is an increasing trend of IC disclosure across the three year study period; and second, whether the types and level of IC disclosure provide insights into the importance attached to IC categories and items. Abeysekera (2008) investigated annual report disclosures for each of the three years (1998 to 2000) of the top 20 public listed companies by market capitalisation in the Colombo Stock Exchange. These results were compared with counterpart firms in the Singapore Stock Exchange from the unpublished study. The author employed the content analysis methodology.

The results for Singapore showed a significant increase in the level of IC disclosure for firms from 1998 to 2000. The results for Sri Lanka were not significant for overall IC disclosure. The Singapore study suggested the mandatory reporting of corporate governance encouraged firms to disclose credentials, expertise and educational levels of their directors. Further, it highlights the need to establish a uniform methodology for financial disclosure under International Financial Reporting Standards (IFRS) that can mobilize globally uniform IC disclosure practices.

Godfrey et al. (2006) examined how combinations of accounting practices and different institutional settings can affect the relevance of accounting for intangible assets, particularly goodwill to equity valuation. During 2001, there were marked differences between the accounting practices allowed in the UK, the US, Australia and China. There were also differences in other countries in the treatments of different types of intangibles including goodwill, brands and R&D.

Godfrey et al. (2006) found that Australian firms have a tradition of capitalising identifiable intangible assets and amortising them in a manner that is relatively consistent with all intangibles. Additionally, Australian capital market participants are familiar with accounting standards that do not permit assets to be capitalised or carried at amounts that exceed their fair values. In contrast, China is an emerging capital market where accounting has not served the same information role as in western countries; instead the capital market is in relatively early stages, and the rules governing accounting practice are less well-developed and less familiar to capital market participants.

The high and significant economic association between Australian firms‟ market value of equity and the book value of their capitalised assets, including intangible assets, indicates that if investors do not obtain information about levels of expenditure on intangible assets and its probable success from sources other than capitalised balances on balance sheets, then the market value of Australian firms‟ equity is likely to fall since the rules governing accounting for intangibles have changed. Internationally, the most likely outcome is somewhere between these extremes as IFRS become more or less aligned with individual country‟s accounting practices, capital markets adjust with some uncertainty to the adoption of IFRS rules, and firms disclose information in notes rather than on the face of their financial statements.

The results of the comparative studies revealed that there are significant differences of disclosure practices between developed markets (Australia, the UK and the USA), a moderately developed market (Singapore), and emerging markets (Sri Lanka and China). Findings indicate that the role of company annual reports as an information source is high in developed markets and less in emerging markets.