Accounting Challenges in Measuring and Reporting Intellectual Capital Assets

Abstract

This research paper investigates the profound and persistent challenges inherent in the
measurement and financial reporting of intellectual capital (IC) assets within contemporary
organizational frameworks. Moving beyond conventional critiques of existing accounting
standards, this study introduces a novel, tripartite methodological framework that synthesizes principles from hermeneutic phenomenology, complex adaptive systems theory, and
agent-based modeling to reconceptualize IC not as a static, discrete asset, but as a dynamic, emergent property of organizational networks. The central research question interrogates whether the fundamental epistemic assumptions of double-entry bookkeeping are
ontologically compatible with the fluid, contextual, and non-linear nature of knowledgebased value creation. Through a qualitative meta-analysis of reporting practices in 45
knowledge-intensive firms and the development of a proof-of-concept simulation model, we
demonstrate that traditional historical cost and fair value accounting paradigms systematically misrepresent IC, leading to significant information asymmetry and valuation gaps. Our
findings reveal that the primary challenge is not merely technical or standard-setting, but
philosophical, residing in the incommensurability between the reductionist logic of financial
quantification and the holistic, relational essence of intellectual capital. The paper concludes
by proposing the contours of a ’narrative-networked’ supplementary reporting model that
emphasizes qualitative disclosures of knowledge flows, innovation ecosystems, and relational
capital maps, arguing for a paradigm shift from measurement to meaningful representation.
This contribution is original in its cross-disciplinary theoretical foundation and its rejection
of incremental adjustment to existing standards in favor of a more radical re-imagination of
value reporting in the intangible economy