The Disclosure of Recognised and Unrecognised Intangibles: Evidence from New Zealand

We examine the reporting of intangible assets and the disclosures on intellectual capital activities by listed companies and public benefit entities in New Zealand and assess the usefulness of these disclosures. Comparing trends in intangible asset disclosure frequency, we note that the most common is capitalised software costs, followed by goodwill. For intellectual capital, we find that qualitative disclosures are more prevalent than quantitative, with disclosure on relational capital being the most frequent. In addition, we find that intangible assets are value relevant, and more intellectual capital disclosures increase the value relevance of goodwill. Finally, we consider intangible reporting by public benefit entities and show that while the rate of intangibles capitalised is similar, they are of less relative economic importance. Overall, our findings provide evidence of divergence in intangible categorisation practice, highlight the absence of reporting digital technologies and call for improved disclosure criteria for recognised and unrecognised intangibles.