Effect of recognition of intellectual capital on relevance of accounting information

Abstract

Innovation is the result of human inquisitive nature. Transacting from Stone Age to the technological driven era, human has been endeavored hard to innovate and improve the life standards of this earth. This paper reviews the effect of recognition of intellectual capital (IC) on relevance of accounting information. The review of this paper suggests that recognition of IC has significant impact on financial information. This paper advocates the major modification in traditional accounting standards and conventional accounting practices to comply with the stipulations of modern and competitive business era and pave the avenue for the recognition of IC as an asset to the firm. Therefore, this paper proposes to researchers, practitioners, and accountants to resolve this long standing issue (non-recognition of IC) by extending the horizon of research, which measures IC.