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The relation between intellectual capital and intangible assets of pharmaceutical companies

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Purpose ‐ The purpose of this research is to assess the visibility of intangible assets on the balance-sheet of pharmaceutical companies. Further, how these assets overlap with intellectual capital and whether a relation can be established between intangible assets and company performance. Design/methodology/approach ‐ Intangible assets reporting practices of a group of 52 globally operating pharmaceutical companies are analysed. These assets are related to intellectual capital definitions and company performance. Findings ‐ Results indicate that the majority of companies are specifying intangible assets and that a considerable overlap occurs with intellectual capital. Intangible assets may constitute substantially to the companies' assets. However, clear relations of intangible assets with company performance could not be established. Practical implications ‐ Imperfections in the reporting of intangible assets are observed. These are the non-uniformity of generally agreed accounting principles and practice around the world, the specification of goodwill and the position of R&D. A number of proposals are put forward to improve the visibility of intangible assets and to bring these in line with intellectual capital definitions. Originality/value ‐ The value of the paper can be found in the approach to fulfil the ideal of intellectual capital valuation through the more practical way of intangible asset specification on the balance-sheet. For the group of companies studied, this paper assesses the situation in 2003 and the way ahead to further improvement.
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Keywords: Annual reports; Goodwill accounting; Intangible assets; Intellectual capital; Pharmaceuticals industry

Document Type: Research Article

Publication date: 01 April 2006

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