Downsizing decisions, intellectual capital, and accounting information

Abstract

PurposeThe purpose of this paper is to present a new method to account for investments in human capital, which the authors have named investment capitalization. This method uses investments in training and hiring of employees as a surrogate for their intellectual capital, capitalizing and amortizing the investment over its useful life. Investment capitalization is compared to the more conventional Generally Accepted Accounting Principles (GAAP) and the newer intellectual capital accounting methods.Design/methodology/approachScenarios comparing the effects of downsizing or organizational performance are used to demonstrate the effects of decisions based on intellectual capitalization and GAAP.FindingsResults of the scenario analysis show that the investement capitalization method causes less destruction of intellectual capital during downsizing decisions than does GAAP.Originality/valueThis paper presents a new method of accounting for intellectual capital and demonstates the benefits of this method when making downsizing decsions.

Does intellectual capital drive bank's performance in Bangladesh? Evidence from static and dynamic approach

“…In order to withstand externalities and competition, firms need intangible capabilities [ 62 ]. The central assumption of RBV theory suggests that IC shields in times of economic turmoil through intangible assets such as customer loyalty, patents [ 63 ], and the skills inherent in the human resources of the firm [ 64 ]. These assets possess unique attributes that cannot be easily imitated [ 65 ].…”

CEO ethical leadership and corporate social responsibility: Examining the mediating role of organizational ethical culture and intellectual capital

“…In the modern knowledge economy, organizations should value intellectual capital as the most imperative asset over their physical capital (Lönnqvist, Kianto, & Sillanpää, 2009). Flint, Maher, and Wielemaker (2012) advocate that an important driver of an organization's competitive advantage subsists in the intellectual capital that is personified in the business employees. Thus, Brunold and Durst (2012) recommended that organizations should incorporate intellectual capital management into their strategic determinations.…”

The HRM–capital market link: Effects of securities analysts on strategic human capital

“…The accounting literature also includes arguments having to do with costs of SHC investments, proposing that certain HR-related expenditures should be capitalized (e.g., Flint, Maher, & Wielemaker, 2012;Vuontisjärvi, 2006). This is in the context of a debate about potential changes to accounting and reporting rules, so as to capture the longer term value associated with near-term cost effects of respective SHC investments (rather than just their near-term cost effects, as is currently the case).…”