THE POWER OF INTELLECTUAL CAPITAL ASSESSMENT AND ITS NEED IN INFORMATION TECHNOLOGY SECTOR

Intellectual capital assessment is a very recent concept which gained importance in 1990s. With the bombardment of information from all corners, the organizations were facing a herculean task in managing the intangibles of the company and as rightly said what is not measured cannot be managed. It is then that the companies stared considering the inclusion of intangibles in their yearly reports. The first Intellectual Capital report was prepared by Leif Edvinson of Skandia - the largest insurance and financial company of Scandinavia in 1994. The industrial economy has been quite easily overtaken by the knowledge economy. Gone are the days when an organization’s wealth was measured by financial metrics alone. Today the measurement of intellectual capital has gained tremendous significance. Organizations compete on the valuation of the intellectual capital and not the valuation of physical assets alone. Moreover modern accounting systems are designed keeping tangible assets in mind – which creates an invisible balance sheet. This paper evaluates the prevailing practices of Intellectual Capital disclosure in top 10 I.T. firms in India using Content Analysis method. The results show strongly that the extent of voluntary disclosure is still insignificant. It is seen that Indian I.T. firms can use IC reports to create a core competence and help with hiring and employee management. It is concluded that India I.T. firms need to focus on appreciating the power of intellectual capital and the same should be reflected in their annual reports as well. The paper also says that IC disclosure is a strong positive step to show to stakeholders that they are serious about challenging the issue of attrition.