ABSTRACT

Discussions have been raised in recent years to assess the appropriateness of the traditional financial report of firms. This is because the existing accounting standards and firms' reporting of their assets of intellectual capital to the business environment is insufficient, especially, now that organizations are investing more in intellectual assets like human resources and investing less in physical assets like machineries. The purpose of this study is to evaluate the intellectual capital reporting practices in Nigeria, and evaluate the effect of capitalization of intellectual assets on the value of firms. Survey data was obtained from 170 respondents to researcher designed instrument. Panel data of Profit before Tax (PBT) and net worth of Associated Bus Company PLC were extracted for a period of 2000-2009, and their human resource cost for the same period capitalized in line with the methodology adopted by Otter (2007) and Ihendinihu (2010). Data were analysed using Descriptive, Regression, and Paired Sample T-test techniques. The results obtained reveals that investment in human resources provide future benefits to the firm and at such its capitalization will increase the value of firms and provide adequate information for decision-making. The results also show that about 48.8% improvement in the net profit could be attributed to capitalization of human resource cost. With t-value of 9.094 being significant at 1% level, this work disclosed that the application two of different accounting treatment to human resource cost have significant effect on the net profit of ABC Transport PLC. Despite the problems facing the capitalization of intellectual assets, the work recommends that the reporting of intellectual assets should be adopted by Nigerian firms, and standard setting bodies in accounting profession should strive to produce a standard that will support intellectual capital reporting.