Three in Ten Firms Fail to Disclose on Intangibles

A report led by the European Financial Reporting Advisory Group found that almost three in ten (29%) companies are not disclosing business model (BM) drivers or risks in the narrative sections of annual reports. The report says this may mean there are a “considerable number of non-compliant companies”, which fail to share information on intellectual capital (IC). This IC includes intangible factors such as know-how, relationships, expertise, and skills. According to the report, information about IC elements in the risk section “rarely contains forward-looking statements that might help users assess how a company is protecting itself from future developments of principal risks”. Only 40% of the IC elements disclosed as value drivers in the BM section are addressed in the section devoted to risks. The report said that “our results suggest that the linkage between BM reporting and risk reporting is rarely satisfactory […] improving the integration between information on IC value drivers and the related risks may provide meaningful information on the outcomes of the value creation process.”  

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