The cover design of this Framework represents the sense of WICI collaboration as an international initiative,
while each picture illustrates some symbolic intangibles drawn from each of the main regions of the WICI
Global Network. In a clockwise order:① U.S.A: Freedom Tower (Resilience)② Japan: Ise Shrine (Sustainability), Mt. Fuji (Spiritual Culture),Bullet Train (Technology)③ Europe: Ferrara Cathedral (Value of the Experience and Knowledge Inheritance)

Copyright © September 2016 by WICI, All rights reserved. Permission is granted to make copies of thiswork to achieve maximum exposure provided that each copy bears the following credit line: “Copyright ©
September 2016 by World Intellectual Capital/Assets Initiative. All rights reserved. Used with permissionof World Intellectual Capital/Assets Initiative. Permission is granted to make copies of this work to achieve
maximum exposure.”About WICIVisionWICI (the World Intellectual Capital/Assets Initiative) recognizes the need for corporate reporting that
integrates the communication of narrative and quantified information on how organizations create value
over the short, medium and long term through the creation, management, combination and utilizationof intangibles. WICI was formed in October 2007, and its participants include organizations
representing companies, analysts and investors, the accounting profession and academia, who
collaborate

togethertopromotebettercorporatereportingbyrecognizing

the

role

of

intangibles/intellectual capital in the sustainability of an organization’s value generation.
(www.wici-global.com)
Network
WICI operates through its national and regional jurisdictions with the aim to promote improved
corporate reporting through a focus on intellectual capital/assets in each of the regions and countries
represented.
Original WICI promoting parties are:

USA: Enhanced Business Reporting ConsortiumEurope: European Federation of Financial Analysts Societies (EFFAS), University of Ferrara

Japan: Japanese Ministry of Economy, Trade and Industry (METI), Waseda University
Activities



Voluntary Reporting Framework – WICI released a comprehensive information framework and
XBRL taxonomy in 2007-2008 to help companies better communicate with their investors and otherkey audiences about business strategy and current and expected performance. This framework can
be viewed at http://www.wici-global.com/framework. Many elements of this framework have been
contemplated in the development of the International <IR> Framework.

Collaboration – WICI supports and collaborates with other initiatives to help further the evolutionof corporate reporting. WICI signed a formal agreement with the International Integrated
Reporting Council (IIRC) in which both parties have agreed to work together to develop and promote
the International Integrated Reporting <IR> Framework and other business reporting frameworks,
guidelines and standards that can be aligned to strengthen corporate reporting with a focus onvalue creation. More specifically, WICI’s support to the IIRC is focused on enabling meaningful
corporate reporting in relation to Intellectual/Organizational, Relational and Human capitals.

Industry Specific KPI Studies – WICI facilitates and cooperates on the development of generally
recognized and accepted industry Key Performance Indicators (KPIs) as one of the important

World Intellectual Capital/Assets Initiative１

elements of the reporting on intangibles and an organization’s value creation story. KPIs may befinancially derived and/or non-financial (i.e. non-monetarily expressed) in nature, and may include
a wide range of market-oriented, industry-specific, and organization-specific indicators. To date,
WICI has developed KPIs for the following industries: High Technology, Mining, Automotive,
Electronic Devices, Pharmaceuticals, Telecommunications, Fashion and Luxury, Electricity, and Oil& Gas (forthcoming). The WICI-Industry KPIs can be viewed and freely downloaded at
http://www.wici-global.com/kpis

Due Process
The “WICI Intangibles Reporting Framework” has been developed and finally approved through thefollowing steps:
Due Process Steps

Date/Period

Decision made on the development of an intangibles

13th May 2015

reporting Framework by WICI Governance Group
Formation of a dedicated technical team within WICI

31st May 2015

Public presentation of the Draft Framework at WICI

4th December 2015

Symposium 2015
Approval of the Framework Consultation Draft by the

11th February 2016

WICI Governance Group
Publication of the “WICI Intangibles Reporting

15th February 2016

Framework Consultation Draft” including an associatedset of consultation questions for stakeholders (www.wiciglobal.com/wirf/WICI_Intangibles_Reporting_Framework_v
1.0.pdf )Period of public consultation

From 15th Feb to 16th May 2016

Analysis of the comments and responses received

From 17th May 2016 to 31th May 2016

Revision of the Framework on the basis of the comments

From 1st June 2016 to 31st Augustand responses received

2016

Final approval by the WICI Governance Group

15th September 2016

Launch of the final version of WIRF

22nd September 2016

Monthly or bi-monthly conference calls by the WICI Governance Group and the technical team havealso been held.

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Table of Contents
Table of Contents .......................................................................................................... ３
Executive Summary...................................................................................................... ４
Chapter 1 – Rationale and Objective of the Framework .............................................. ７
1-1 Background ............................................................................................................. ７
1-2 Objective of the WICI Intangibles Reporting Framework .................................... ８
1-3 The Primary Audience and Information Users of the Framework ....................... ９
1-4 Intangibles Reporting and Strategic Management ............................................ １１
Chapter 2 – Definition of Intangibles ........................................................................１３
2-1 The Definition of Intangibles .............................................................................. １３
2-2 Categories of Intangibles ..................................................................................... １４
2-3 Interrelatedness between Intangibles and Value Creation ............................... １６
Chapter 3 – Interpretations of Principles for Intangibles Reporting andCommunication......................................................................................................１８
Chapter 4 – Structure of Intangibles Reporting ........................................................２０
4-1 Key Performance Indicators (KPIs) .................................................................... ２０
4-2 Value Creation Story focusing on Intangibles .................................................... ２２
A: Outline of Business and Management Philosophy .......................................... ２３
B: Intangibles and Value Creation from Past-to-Present..................................... ２４
C: Intangibles and Value Creation from Present-to-Future ................................ ２９Appendices .................................................................................................................３４
Appendix 1: Comparison between the classifications of capitals by WICI and IIRC
Frameworks ............................................................................................................... ３４
Appendix 2: Economic Characteristics of Intangibles .............................................. ３５
Appendix 3: Differences from Accounting Definition ............................................... ３６
Appendix 4: Extant principles for reporting and communication of intangibles .... ３８
Appendix 5: Examples of Interrelatedness between KPIs ....................................... ３９
Glossary .....................................................................................................................４２

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Executive Summary
The Rationale of the Framework
It is globally recognized that intangibles are the key resources for organizations to create
value in a sustainable manner over time. Indeed, for many organizations these resources,
which are mostly grounded in different forms of knowledge, represent a major portion ofan organization’s current and future value.
However, information and metrics reported on intangibles are generally scarce, and in
most cases insufficient, for both internal management and external investors, creditors
and analysts. This is a paradoxical situation in the context of a knowledge-based economy
and an ever-increasing role of services and technological and non-technologicalinnovations.
Since 2007 WICI, the World Intellectual Capital/Assets Initiative, has been focusing on
and advocating for the idea of a better representation of intangibles in the context ofvalue creation, and has been collaborating to develop a framework to help organizations
effectively and efficiently report on intangibles.
Based on a due process and after an international public consultation, the “WICIIntangibles Reporting Framework” (hereinafter called “the Framework”) aims to fosterand facilitate reporting on how organizations create and/or identify, manage, combine
and utilize their unique intangibles in order to generate value and achieve businesssustainability.
The WICI Framework is intended to help organizations to make decisions and allocate
resources in a more effective and efficient way. Therefore, a report based on the
Framework is expected to be beneficial to both the organization itself and its
stakeholders.
The Framework does not require organizations to produce a new type of report inaddition to existing ones. Information and metrics on intangibles can be reported via
various forms of corporate reporting, including Integrated Reports and other business

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reports for both internal and external use.
Contents of the Framework
The Framework is principles-based. Accordingly, no detailed reporting rules are provided.
Furthermore, the Framework addresses essentially non-financial information andindicators (KPIs).
The Framework (in its four Chapters) sets out its purpose and describes the contextual
background, provides a definition and a classification of intangibles, offersinterpretations of the main principles for intangibles reporting and communication, andoutlines the possible structure and contents of reporting on intangibles.
More specifically, Chapter 1 introduces the consideration that the current financial
reporting model focuses primarily on historical performance, which in isolation does notfacilitate a full understanding of the value creation mechanism of an organization andthe associated role of intangibles, especially from a future-oriented perspective. A
corporate reporting framework that integrates the communication of narrative andquantified information on intangibles expressed in both financial and, in particular, nonfinancial (i.e. non-monetary) terms can serve as a catalyst for an organization to evolve
towards a positive cycle of value creation and meaningful communication with its
markets.
In Chapter 2, intangibles are defined and categorized into organizational capital, humancapital and relational capital, which represent the main sources of the organization’svalue creation currently and in the future, both individually and by virtue of theirdynamic interrelations.
Chapter 3 identifies the most important principles for intangibles reporting andcommunication. They are materiality, connectivity, conciseness, comparability, andfuture orientation. An interpretation of these five principles in the context of reportingon intangibles is provided to guide organizations to recognize explicitly these resources
through reporting of narrative information and indicators.

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In Chapter 4, KPIs (Key Performance Indicators), an essential component of thestructure of intangibles reporting, are defined. There is a recognition of their crucial rolein identifying and quantifying the material element(s) for the organizations’ value
creation, as well as in increasing the understanding of information users by integrating
and supporting narrative explanations.
A sample structure for intangibles reporting is also proposed as follows:A) Outline of business and management philosophy;B) Intangibles and Value Creation from Past-to-Present (strategy, business/activity
model, intangibles as strategic resource(s), current performance);
C) Intangibles and Value Creation from Present-to-Future (strategy in a changing
business environment and intangibles utilized, identification of risks and actions tomaintain/improve intangibles, future targets and business sustainability).
Some examples of KPIs are also provided.
Additional information is provided in the Appendices, which is intended to help
managers and external stakeholders to gain a deeper understanding of the Framework,and to identify other valuable resources, including guidelines and other examples of KPIs
for intangibles reporting.

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Chapter 1 – Rationale and Objective of the Framework
1-1 Background
WICI recognizes the need for a corporate reporting framework that integrates thecommunication of narrative and quantifiable information on how organizations create
value over the short, medium and long term through the creation, management,
combination and utilization of intangibles. WICI sees the business or an organization asa value creation mechanism which converts financial and non-financial (or “nonmonetary”) inputs to outputs and outcomes, including financial performance.
Value creation over time is essential to the sustainability of the business or an
organization, not only from a socio-environmental point of view, but also from theperspective of the continuity of the business.
The main objective of business reporting 1 is to connect stakeholders and companies by
providing information which describes the substance and strategy of the organization.
Therefore, WICI believes that business reporting should include an explanation of thevalue creation mechanism of the organization over time.
In order to provide information that can help stakeholders better understand the future
prospects of the organization, each entity needs to clearly articulate 1) the value creation
mechanism which is unique to the organization and sustainable in the future, 2) the
specific strategic assets, including the intangibles that are the key factors of the value
creation mechanism, 3) the organization's own perspective concerning risks andopportunities for the future, and 4) the strategy for the future business, including how itwill utilize those strategic assets.
The provision of the above information conveys organizational accountability from the
management for the development of intangibles and their contribution to the entity’svalue creation story.
A form of reporting which focuses on qualitative (narrative), quantitative, financially and non-financially expressed
information about the past, present and future value creation process of an organization and the strategy, the resources(especially of intangible nature), the governance and the organizational model which support it.

1

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Within today’s corporate reporting environment there is insufficient reporting on
intangibles, especially in consideration of the fact that investments in intangible assets
has overtaken that of tangible investments for more than two decades, and the value of
intangibles now accounts for the majority of the market capitalization of listedcompanies 2.
Traditional accounting recognizes intangibles only when they are acquired, either as
individual assets or within a merger and acquisition transaction. This reporting gap
hinders the understanding of an organization’s value creation mechanism due to thestrategic importance of intangibles.
1-2 Objective of the WICI Intangibles Reporting Framework
The purpose of the “WICI Intangibles Reporting Framework” (“the Framework”
throughout this paper) is to provide the definitions, the interpretations of the most
relevant principles, and the structure for the reporting of intangible resources that arematerial for an organization’s value creation process and their communication to
stakeholders from the perspective of showing business sustainability over time.
Taking into account various legal requirements for reporting, standards, frameworks,
and guidelines, and with particular reference to the six capitals model proposed in
December 2013 by the International Integrated Reporting Framework 3 of theInternational Integrated Reporting Council (IIRC), WICI’s Framework focuses onIntellectual Capital 4, which encompasses Human capital, Organizational capital and therelational aspects of the Social and Relationship capital (see Figure 1.1 and Appendix 1).

See Carol A. Corrado and Charles R. Hulten, How Do you Measure a ‘Technological Revolution’? American Economic
Review, 100:5 (May 2010), pp. 99-104; and Ocean Tomo, LLC, Annual Study of Intangible Asset Market Value, 2015.
2

The International Integrated Reporting Framework can be downloaded at
http://integratedreporting.org/resource/international-ir-framework/
4 The categorization of capitals by WICI is slightly different from that put forward by the IIRC. WICI is adopting the
traditional categorization of "Intellectual Capital" which consists jointly of Human capital, Organizational capital and
Relational capital, while the notion of "Intellectual capital" as proposed by the IIRC refers only to the Organizational
capital (see IIRC Framework, 2013, paras. 2.15 and 2.18). See also Appendix 1.
3World Intellectual Capital/Assets Initiative８

【Figure 1.1】 WICI’s Framework Focus within the corporate reporting landscape

Corporate Reporting
Financial
Reporting

WICI’sFinancial

Manufactured

HumanIntellectual

CapitalCapitalCapitalCapital*Sustainability
ReportingSocial and
Relationship
CapitalNaturalCapitalSix capitals as defined by IIRC

The Framework is principles-based. Accordingly, no detailed reporting rules are provided.
The Relationship between WICI’s focus and the IIRC’s six capitals is further illustrated
in Appendix 1 on “Comparison between the classifications of capitals by WICI and IIRC
Frameworks”.
1-3 The Primary Audience and Information Users of the Framework
The primary target audience of this Framework is all companies and other organizations
belonging to the private, public and not-for-profit sectors.
Reporting and communication on intangibles are intended to provide useful information
for decision making, and in particular resource allocation decisions, primarily to theorganization’s management as well as to the providers of financial capital including
investors, creditors, and analysts. These are expected to be the primary information
users of this Framework.
* Organizational Capital according to WICI Framework

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The Framework is also relevant to other stakeholders who are interested inunderstanding and assessing an organization’s intangibles and their role in value
creation over time.
The Framework is not meant to require organizations to produce a new type of report inaddition to existing reports. Information about intangibles can be reported and employedin various forms of corporate reporting, including integrated reports and business reports
for both internal and external use.
The Framework will be helpful in providing a deeper understanding and a better
reporting of intangibles and it can be used to create either a stand-alone intangibles
report or along with other existing frameworks for producing various forms of reporting.
This Framework addresses, in particular, the reporting of intangibles not covered bycurrent financial accounting standards.
The Framework aims to support reporting of intangibles from the perspective of value
creation. It focuses on reporting of non-financial elements and not on the valuation ofthese resources.
Financial valuation is not always necessary or practical in communicating the value of
intangibles (e.g., customer satisfaction or organizational climate do not necessarily haveto be expressed in monetary terms to be managed or appreciated). Monetization may notalways be the most effective way to understand or manage intangibles from a strategic
perspective.
Accordingly, when the term non-financial is utilized in this Framework, it refers tonarrative information, or quantified information that is not necessarily expressed inmonetary units (e.g., percentage, Likert scale, absolute number, physical measures), but
it is still relevant in financial and/or strategic value terms.

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1-4 Intangibles Reporting and Strategic Management
The Framework covers specific ways of reporting on intangibles by focusing on the value
and business contribution of the intangibles to the entity’s strategic management.
For internal purposes, the most important aspect is not the report itself. Indeed,internally the most relevant benefit for the management of the entity is obtaining agreater understanding of its strengths and its vision for the organization through theprocess of reporting on intangibles.
The following Figure 1.2 depicts the evolution of reporting towards the establishment ofa positive information cycle between an organization and its stakeholders.
【Figure 1.2】Positive information cycle between an organization and its stakeholders
Market, etc.
“Information desiredfor decision-making”

Corporation

Market, etc.
“Information desiredfor decision-making”

Corporation“Information
wished to be known”

Market, etc.

“Information desired for decision-making”

Corporation“Information wished to be known”“Information
wished to be known”

Time
Strike Zone

=matching materiality between corporation and Stakeholders

An organization should recognize that there is an information gap between itself and its
stakeholders. Accordingly, it is crucial for the organization to consider an appropriate
way to deliver information about intangibles to the stakeholders. This may initiate theprocess of enhanced mutual understanding through a dynamic information exchange.
In this respect, it is envisaged for the stakeholders to communicate with the organization
by indicating ambiguous points and any improvements to be made. This would promote

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enhanced awareness of stakeholder needs within the organization, which may lead tobetter management and more relevant reporting. This in turn may enable higher quality
analysis by stakeholders.
The reporting of intangibles can be a catalyst for an organization to evolve toward theestablishment of a positive cycle of value creation. In other words, consistentcommunication between internal and external stakeholders of the value creation
potential of intangibles can lead to an increase in managerial efficiency, an enhancementof the competitive strength, and a more sustainable growth of the entity.

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Chapter 2 – Definition of Intangibles
2-1 The Definition of Intangibles
The Framework sets out the scope for an organization to describe, manage, report andcommunicate material intangibles which create value.
Intangibles are non-physical resources which, either alone or in conjunction withother tangible or intangibles resources, can generate a positive or a negative effect on
the value of the organization in the short, medium and long term.
Intangibles with a positive effect on an organization’s value creation may convert
themselves into negative resources with an adverse impact on the value of the sameorganization. Intangibles-related risks are often those linked to the potential
transformation of a positive resource into a negative resource vis-à-vis the value creation
processes of an entity 5.
Intangibles are therefore positively or negatively 6, directly or indirectly, associated withan organization’s capacity to create value. In particular, they may produce two distinct
but inter-connected forms of value:•

Strategic value is that related to the enhancement of the competitive, market,
product, reputation, and/or risk profile of the organization;•

Financial value is that linked to the generation of net cash flows over time.

Intangibles are resources that are available for use by an organization. Sometimes, they
are actively managed in a fully conscious way, but other times they exist or are utilized
beyond, or with a limited amount of awareness by, the organization (e.g., reputation).
For a full description of the economic characteristics of intangibles resources, see Appendix 2.
In this respect, an organization may have positive intangible resources (sometimes known also as “intangible assets”)
which are the drivers of its long-term competitive differentiation and advantage. They derive from a strategic
utilization (including the combination) of intangibles that is conducive to an organization’s sustainable strategic value
and/or sustainable future streams of cash flows. Accordingly, a patent that an organization owns, but that it did not,nor will not, employ effectively in its value creation processes may be outside the scope of this Framework. However,a patent defensively used is a positive intangible resource which falls within the boundaries of this Framework.
An organization may also have negative intangible resources (sometimes known also as “intangible liabilities”), i.e.
intangibles that may have substantive negative impact on an organization’s strategic and/or financial value (e.g., bad
reputation of the organization; poor management quality and leadership). Negative intangible resources are often
linked to specific risks of an entity.

5
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Unlike assets as defined in financial accounting (e.g., under the IASB Conceptual
Framework for Financial Reporting 7), it is not necessary that intangibles are owned orcontrolled by an organization. They simply have to be available and/or utilized by theentity with the aim of generating value.
2-2 Categories of Intangibles
The above definition of intangibles is fundamentally equivalent to the concept ofIntellectual Capital.
Intellectual Capital encompasses the internal (competencies, skills, leadership,procedures, know-how, etc.) and external (image, brands, alliances, customer satisfaction,etc.) intangibles which are dynamically inter-related and available to an organization,
thereby enabling it to transform a set of tangible, financial and human resources into asystem capable of pursuing sustainable value creation 8.
As pointed out earlier (para. 1.2.), Intellectual Capital is typically categorized into threemain categories, which are 1) Organizational capital, 2) Human capital, and 3) Relational
capital. The boundaries of these categories are flexible and they should not beinterpreted/perceived in a static or rigid way.
The following are typical examples of intangibles that may be considered under the
categories of Organizational, Human and Relational capital.

See Appendix 3 and also refer to IASB Conceptual Framework for Financial Reporting (Exposure Draft May 2015)
http://www.ifrs.org/Current-Projects/IASB-Projects/ConceptualFramework/Documents/May%202015/ED_CF_MAY%202015.pdf
8 Intellectual capital is explained in the August 2004 document “Intellectual capital statement – Made in Germany”
at p. 8 as: “The existing knowledge of an organisation that is critical to success, the so-called intellectual capital –plays a vital role in the creation of innovative products or services in the coming financial years which can be sold at
a profit.” (http://www.akwissensbilanz.org/Infoservice/Infomaterial/Leitfaden_english.pdf).
7

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Business processes, data and systems that enable theorganization to deliver products and services and create
value.
Organizational capital(e.g., Organizational culture; Organizational climate;
Corporate Governance; Data Quality; Data sets;
Processes; Rapidity in the development of products andservices).
The value that the employees of a business provide
through the application of their skills, competencies,
knowledge, etc.

Human capital(e.g., Employee competencies and skills; Leadership;
Loyalty to one’s organization; Capability of intellectual
creation supported by a broad base of engineers andtechnicians).
The value inherent in an organization's relationships
with its customers, vendors, suppliers, business
partners and other important constituencies.

Relational capital(e.g., Medium-term business relationships between
consumers, business partners and other organizations(High quality network; Speed with which a problem issolved through communication with customers; Image
and reputation with customers, institutions and otherstakeholders; Level of (e)valuation from financial
institutions).

These resources are generally linked to various forms of knowledge 9 in and around theorganization and its people.

9 OECD, New Sources of Growth: Knowledge-based Capital, October 2013.

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2-3 Interrelatedness between Intangibles and Value Creation
An organization is a system which combines various inputs to create value 10 . Value
creation by an organization is rarely the outcome of only one individual intangible, rather
it is the result of the dynamic interactions of tangibles and intangibles, as well as therelationships and conversion processes between the above-defined three categories ofintangibles.
The following illustration provides a depiction of how the three categories of intangibles
are interrelated and can be converted from one into another in order to create value overtime.
【2.1】 Relationships between intangibles
Outside of the Organization

Inside the Organization
OC

RC

HC

【Intellectual capital】
OC : Organizational Capital
HC :Human Capital
RC : Relational Capital

10 The “Connectivity background paper for <IR>” issued by IIRC in collaboration with WICI further explains theimportance of the interrelatedness of various capitals and the role of the organization as a system.
Connectivity background paper for <IR>:
http://integratedreporting.org/wp-content/uploads/2013/07/IR-Background-Paper-Connectivity.pdf

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Illustration of the Dynamics of Intangibles (Figure 2.1)•

The intangibles that most crucially influence an organization’s value consist ofOrganizational, Human and Relational capitals. Figure 2.1 above depicts theoverlap between Organizational capital, Human capital, and Relational capital asa result of the dynamic interaction and transformation from one to the other overtime (thus, it is not intended to imply that they have something in common as ofa point in time).

•

Organizational capital, Human capital and Relational capital are interrelated andcreate synergistic effects. For example, Human capital, such as personal knowhow or innovative thinking, allows people in the organization to develop
products/services. These products/services will be delivered to the customer(=Relational capital) through the organizational business model (=Organizational
capital). After delivery, the organization’s ability to meet customers’ needs isrepresentative of Organizational and Relational capitals. The organization cancollaborate through Relational capital for new innovation (=Organizational
capital).

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Chapter 3 – Interpretations of Principles for Intangibles Reporting
and Communication
Despite the fact that reporting format and content may vary because each organization
can choose its own way to inform internal and external stakeholders, the following
generally shared reporting and communication principles can be adopted to improve
communication of intangibles and their role within the value creation mechanism of theorganization.
These principles are interconnected and interdependent. The consistent application ofthese principles will support a meaningful articulation of the intangibles-based narrativevalue creation story with KPIs, which is further explained in Chapter 4.
Principles and guidelines from existing corporate reporting frameworks are wellestablished. Rather than presenting new and different intangibles reporting principles,
the role of this Framework is to identify the most important principles for intangibles
reporting and communication, and to provide an interpretation of each selected principle
in the context of reporting on intangibles.
In Appendix 4 on the “Extant principles for reporting and communication of intangibles”,
a list of the relevant reporting principles drawn from existing frameworks can be found,as well as the web links to the definitions of these principles.
Principles of materiality, connectivity, conciseness, comparability and future orientation
are considered most important from an intangibles reporting perspective, and aninterpretation of each principle is provided below.
Materiality
An organization should report on what matters most to its ability to create value overtime. Intangibles can contribute significantly to this ability. On the other hand, material
intangibles and KPIs may be easily overlooked due to their non-physical nature.
Therefore, organizations need to carefully select and report on those intangibles which
are key factors to generate value.

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Connectivity
Intangibles are factors influencing the organization’s financial and non-financial
performance. Appropriate reporting of information and KPIs should create a link among
strategy, business model and financial performance.
Providing a narrative and quantitative description of the dynamic interactions oftangibles and intangibles, as well as of the relationships and conversion processes
amongst intangibles is useful information as those are the sources of sustainable value
creation for organizations.
Conciseness
Most of the intangibles that contribute to an organizations’ value creation are unique.
Accordingly, their explanation can lead to lengthy reports, however it is preferable toreport the essential points in a simple and understandable way for their reporting andcommunication.
Comparability
Organizations’ reporting of material intangibles (as well as of combinations ofintangibles) for their specific value creation may be useful in comparing and contrastingorganizational visions. In addition, organizations should continue providing information
on material intangibles and their combinations as well as the related KPIs to empowerusers to compare them over time. Reporting of KPIs related to intangibles can becomparable if other entities also report on the same or similar KPIs.
Future orientation
An organization should articulate how the selected information and indicators on
intangibles contribute to its ability to create value in the future. The key elements to bereported are the intangibles-related leading indicators and information, which
predictively suggest the organization's capacity of creating value in the future and theassociated risks, and are based on past or current facts and events (see Chapter 4
concerning leading indicators).

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Chapter 4 – Structure of Intangibles Reporting
This Chapter covers the essential architecture and information content of anorganization’s reporting of intangibles and its value creation potential.
An important qualifying element of reporting on intangibles and the organization’s value
creation mechanism is an integration, to the extent possible, between narrative
information and quantitatively expressed information represented as Key Performance
Indicators (KPIs).
Organizations should present their KPIs together with clear explanations of the way they
have measured these indicators.
4-1 Key Performance Indicators (KPIs)
The inclusion of KPIs is expected to raise the reliability and verifiability of the report 11.
Definition of KPIs
KPIs are numerical figures (metrics) related to critical/material factors of value
creation and which should provide objective evidence of performance trends bytracking them over time.
KPIs can be categorized as leading or lagging indicators depending on the prevalent timeorientation (past, present or future) of their meaning or implication for an organization’s
performance or activity.
Leading Indicator

Lagging Indicator

An indicator which has a predictive
capacity and may refer to theperformance to be achieved. It is futureoriented and it is generally based onpresent events or phenomena.

An indicator which refers to theperformance achieved and past events. It
is therefore past-oriented in nature.

11 For more detailed information, refer to the WICI concept paper on KPIs :http://www.wici-global.com/wp-content/uploads/2012/06/Concept-Paper-on-WICI-KPI-in-Business-Reportingver.1-.pdf.

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Role of KPIs in Reporting
KPIs support the narrative explanation of the organizational strategy, linking it topast, present or future financial and/or strategic performance.
Organizations may not wish to provide information about every material matter due toconfidentiality reasons. However, if KPIs related to material matters are provided,
especially in the context of strategy, they can help information users to better understandthe organizations' ability to create value.
According to their level of relevance, KPIs can be articulated on three levels; General,
Industry-specific and Organization-specific.
•

General KPIs are those that may be relevant for most organizations across industries
and sectors.

•

Industry-specific KPIs are those specific to a certain industry or sector 12.

•

Organization-specific KPIs are those specific to each organization that should bereported in order to best represent its unique value creation mechanism.

The organization’s specific choice of KPIs (or a combination of them), which reflect anentity’s value creation mechanism, can help users to compare the company to others.
There are typically three categories of comparability for analyzing the presented KPIs:
1) Time-series analysis: compare the change in KPIs over time;2) Competitive analysis: compare KPIs across companies;
3) Actual and forecast analysis: compare actual and forecasted KPIs.
Organizations are expected to report the KPIs which best represent the uniqueness of
their value creation mechanism.
The mere observation of one KPI at a point in time would provide little information (e.g.,“customer satisfaction of 5.6 out of 7 in 20XX” is not meaningful per se). Considerationof trends of KPIs over time and of their interrelationship is therefore essential for their
12 WICI has elaborated Industry-specific KPIs that can be found at http://www.wici-global.com/kpis.WICI Industry-

specific KPIs are suggested only to represent a set of industry relevant indicators from which an organization canchoose.

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interpretation and understanding.
It is expected that an organization reports outcome-based indicators over time, for theminimal number of periods that is needed for users to correctly understand the meaningof those indicators (e.g., the trend of the KPI ‘revenue from internal R&D–generated
products’ in a pharmaceutical company, or the KPI ‘flight occupancy rate’ for an airline
company). Organizations should also report how these indicators have been calculated,
and their sources or references.
As explained earlier, it is also important to describe how intangibles-related activities
can eventually lead to either revenue growth or profitability improvement. Intangiblesrelated indicators connected to strategic and/or financial results will help information
users understand the story of the organization’s value creation, and set the foundation
for predicting the organizations’ strategic and financial value (see Appendix 5: Examplesof Interrelatedness between KPIs).
4-2 Value Creation Story focusing on Intangibles
Intangibles reporting should be articulated under the following three main sections:
A: Outline of activities and value creation model;
B: Intangibles and value creation from past-to-present;
C: Intangibles and value creation from present-to-future.
This Framework is principles-based and does not prescribe the order of the above threemain sections. The order of these three main sections can be flexible according to eachorganization’s value creation story.
For the purpose of providing a more concrete illustration of material intangibles closely
related to value creation and/or the connectivity between intangibles and financial
performance, some typical elements as well as a few KPIs are presented in this section.
However, these are simple examples, so it may not be necessary for an organization toreport on all elements and KPIs in its intangibles reporting.

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A: Outline of Business and Management Philosophy
This section consists of the illustration of the general characteristics of the organization’s
activities and its resilient management philosophy, with a particular attention devoted
to its value creation mechanism.
Management Philosophy
The philosophy of management represents the raison d’être of the organization.
Accordingly, it includes the vision and the mission of an entity in relation to its value
creation mechanism.
Typical elements:•

Management’s philosophy and policies that underscore the organization’s business
management;•

Whether past business developments reflected management philosophy;•

How the management is conveying or intends to convey the company’s philosophy towhom, to what extent and by what means.
Examples of related KPIs
Degree of internal
penetration ofmanagement principles

Figures

Implication

Survey by the organization
itself or by external
entities

When management
philosophy and targets arewell understood byemployees and shared withstakeholders, suchintegrity of theorganization may
contribute to enhancing
the organization’s strength
leading to higher sales,
profit and reliability

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Outline of the Business
Outline of the business represents the activities of the organization, with particularreference to value proposition, the main products/services offered to the markets andcollaboration and/or competition with other entities.
Typical elements:•

Main areas of the business (goods/services) and intended customers;•

Basic sales structure, e.g. Business to Business (BtoB) and Business to Customer(BtoC);•

Market size, major competitors and the company’s position in its industry at thenational and/or regional level.
Examples of related KPIs

Calculation

Implication

Operating profit margin ofmajor business line(s)Operating profit of major
business line(s) divided bysales of major businessline(s)High profit margin
suggests competitive
advantage of theorganization in thebusiness line(s)The numbers of competingcompanies providing thesame products or services

The numbers of competingcompanies in each major
product accounting for asignificant percentage of
total sales of the company

When many organizationsin the same industry
compete on their main
products or services,intense price competitionis likely, resulting in a low
profit margin

B: Intangibles and Value Creation from Past-to-PresentThis section deals with the reporting of information on intangibles, their role in thestrategic management of the organization, and their contribution to value creation fromthe past to the present period. Information can be presented using KPIs.

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Strategy
The strategy that the organization intended to implement to create value, as consistent
with the Management Philosophy, is described.
Typical Elements:•

Status of selection and concentration of products or services, technology field,
customers and market;•

Choice of areas for investment or R&D;•

Specific initiatives to implement the strategy.
Examples of related KPIs

Calculation

Implication

Ratio of specialized sales
to total sales

Sales of products orservices for specific users
or specialized markets
divided by total sales

When a company has some
portion of specific users or
specialized fields for which
the company has a uniquestrength and a small
number of competitors, it
may contribute toimproving the total profit
marginAgility related towithdrawal from
unprofitable business

Number of businessdepartments closed or soldoff in the past 5 years,
with the figure of theirsales volume in theprevious fiscal year andtotal profit or loss comingfrom the withdrawal

When a company decides
to give up some business or
specific products orservices in a timely
manner reflecting a
related change in businesscircumstances, such a
withdrawal may
significantly contribute toimproving its profit margin

Degree of R&D
concentration

R&D investment in major
business area divided by
the total R&D investment

Status of concentration of
R&D costs for the main
business area including
related areas with thepossibility of future
evolution provides insight
into the strategic
characteristics of R&D in
the organization

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Business/Activity Model
The way activities are planned and implemented in order to achieve the organization’s
strategy is identified here, briefly described and quantitatively expressed (if possible).
Typical Elements:•

How a company differentiates its business, product or service from others;•

Line-up of products or services.
Examples of related KPIs

Calculation

Implication

Ratio of R&D expenditurecompared with sales 13

R&D expenditure divided
by salesIn the case where acompany focuses ontechnology as an important
tool for creating value,
enthusiasm for R&D
suggests the possibility ofdifferentiation which maylead to greater profitability

Human Resource
Development (HRD)
expenditure per employee

Total HRD expenditure
divided by number of
employees

HRD expenditure may leadto enhanced creative
activities by employees,
possibly resulting in
improved competitive
advantage for thecompany.

New product ratio

Sales of products orservices within three years
from the initial sales
divided by total sales

Bringing new products andservices to market may
contribute to increasing ormaintaining unit price aswell as attracting newcustomers

13 This KPI has both a lagging and a leading indicator nature and significance.

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Intangibles as Strategic Resource(s)An organization’s strengths, which include both intangibles and their relationship totangible and financial assets, are described as the key factor in the company-specificvalue creation mechanism.
Typical Elements:•

Advantageous negotiating power vis a vis suppliers or customers;•

High quality of main products or services;•

Level of mutual trust with primary stakeholders such as financial institutions andthe local community;•

Organizational capability and effectiveness, including human, technological andcreative capability.
Examples of related KPIs

Calculation

Implication

Price elasticity of productsales compared to cost of
goods purchased

Rate of change inshipment unit price ofmajor products divided byrate of change in the priceof raw materialHigh value, close to or
greater than one, of priceelasticity might mean thatthe company has superior
negotiating power withcustomers. Even in thecase of increasing costs,
such a company may
maintain or enhance its
profitNumber of recalls

Total number of units
which fell into the recall
product category during
the business year

Low number of recalled
product units may
translate to high quality of
products as well as lower
additional cost to deal withrecalls. This figure isespecially meaningful inthe automobile andconsumer electronics
industries, for example

Changes in customer unit
priceYear on year sales value
divided by the number ofsales

An increase in this figuresuggests that thecompany’s attractivenessto existing customers is

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growing or that it has
successfully found newcustomers who place highconfidence on it
Level of credit confidence

Average contracted
interest rate in loan or
straight bond issues minus
prime rate

A smaller difference maytranslate to a stronger
level of financial market
confidence in the company,
resulting in a lower cost ofcapital

Number of proposed andimplemented internal
improvement proposals

A larger number of
proposals suggests thatworkers have highmotivation to improve theperformance of thecompany. The number of
proposals implemented
suggests the level ofquality of proposals which
may enhance corporate
performanceIntellectual property
owned and its citation

Intellectual Property
Rights (IPRs), the resultsof past intellectual
activities, can be indicativeof the company’s relativecompetitiveness, as long as
they are actually
implemented. The qualityof IPRs can be evaluatedby the number of citations
in external documents

Current Performance
Current financial performance, such as an organization’s profit or cash flows, as well as
intangibles-related performance, such as market share or reputation, generated from theutilization and interaction of strategic intangible and tangible resources, is here
quantitatively documented and explained.

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Typical Elements:•

Financial results such as sales, costs, profits, cash flows by geography, businesssegment, etc.;•

How the company is evaluated by important stakeholders.
Examples of related KPIs
Degree of customer
satisfaction

Calculation

Implication

Survey by the company
itself or external research

A high degree ofsatisfaction may drive
positive changes in sales
volume or profit margin

Inclusion in Socially
Responsible Index (SRI)
funds at the end of year or
during the year

Suggests that thecompany’s social
performance was positively
received and resulted in
attracting more investors,
which may have lowered
the cost of capital available
to the company

Corporate image

External survey of ranking
by permanent job seekers
or as a general perception

Positive image may reducethe cost of recruiting
highly talented people aswell as that of negotiation
with material stakeholders

Credit rating

Current credit rating
provided by each credit
rating company

A higher credit rating may
result in a lower cost ofcapital and moresustainable relationships
with business partners

C: Intangibles and Value Creation from Present-to-FutureThis section covers information on intangibles, their role in the strategic management of
the organization, and their contribution to value creation from the present to the future
period. Information should be presented using KPIs which are related to future
performance.

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２９Strategy in a Changing Business Environment and Intangibles Utilized
The strategy for value creation in the future, as well as the business model, activities
and key intangibles utilized to pursue the strategy are explained in a systematic manner.
Typical Elements•

Process through which the company recognizes possible changes in the businessenvironment, including opportunities and threats which may have a critical impact
on its value creation;•

Strategy the company will adopt in the future in relation to the evolution of thebusiness environment;•

Investment, action plans and key intangibles to implement the strategy;•

Measures for creating or attaining new intangibles to enhance the company’s
strengths or diminish weaknesses.
Examples of related KPIs
Outsourced R&D cost
ratio 14

Calculation
Outsourced R&D cost
divided by total R&D
expenditure

Average age of employees

Implication
Outsourced R&D may be
indicative of flexibility anda positive attitude towardinnovation
If a company intends tofocus on a younger target
market, a lower averageage of employees may
indicate a higher
likelihood to develop
products or services
attracting more customers

Degree of employee
satisfaction

Survey by the company
itself or external research

Employee confidence inthe organization may drivea spirit of cohesion,
creativity and innovation,
resulting in value creation

Number of products in thepipeline covered byNumber of products
waiting for

The number of products inthe pipeline provides an

14 Likewise the previous KPI “Ratio of R&D expenditure compared with sales”, also this KPI has both a lagging anda leading indicator nature and significance.

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patents

commercialization, themain elements of which
are protected by patents(especially in thepharmaceutical industry)

Number of patents witheconomically meaningfulremaining terms

indication of future
potential revenue streams

These numbers suggests
the company’s potential tocontinue profiting in the
future from products
protected under patents

Identification of Risks and Actions to Maintain and/or Improve Intangibles
Risks, opportunities or uncertainties that may damage or improve strategic resources,
including intangibles, are identified. Planned future actions intended to address theseelements are also to be presented.
Typical Elements•

Critical risk factors that could threaten the company’s strength or future
performance;•

Sustaining key intangibles utilized for responding to risks or taking advantage ofopportunities, including those related to organizational, human, technological or
relational capabilities;•

Risk management process and supporting governance structure.
Examples of related KPIs
Compensation claims inpending lawsuits

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Calculation

Implication
This figure reflects the
maximum potential
amount of future damages
in a lawsuit. To make clear
the maximum downsiderisk reduces theuncertainty for thecompany and provides
investors with confidence
in investing in thecompany

３１Diversification of risks

Number of main factories
of suppliers of coreproducts, or HerfindahlHirschman Index, whichshows the degree ofdecentralization of theshare of major products inrelation to total sales

In cases where a company
relies upon a small
number of factories
supplying core products, orupon a small number of
products, an incident orchange in the market may
suddenly deteriorate total
production, sales or profit

Risk of being an
acquisition target 15

Present corporate value instock market minus net
cash, divided by book valueof net assets

When a share price falls
below the perceived
potential of theorganization, it may
become a target for
acquisition at a suboptimalor bargain priceJob leaving ratio

Number of employees
leaving the company
during one year divided bytotal number of employees
at the beginning of theyear

For an organization
which relies heavily on
Organizational capital, alower emigration ratio may
indicate better future
profits by maintaining
capability as well as
minimizing the risk ofoutflow of knowledge andknow-how

Degree of employee
satisfaction

A high degree of employee
satisfaction suggests thatthe company may be in agood position to respondsuccessfully to risk

Future Targets and Business Sustainability
Expected future financial targets such as sales, costs, profits and cash flows, as well as
intangibles-based targets, such as reputation and customer satisfaction, are portrayedand supported by appropriate KPIs.
From an investor point of view, the risk of being an acquisition target can also be considered as anopportunity/solution.

15

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Typical Elements•

Target figures of financial elements such as revenues, costs, profits, cash flows;•

Target figures of management indicators such as ROE, ROA or total shareholder
return (TSR);•

Target customer satisfaction, target cost of capital, target employee satisfaction;•

Prospective coexistence with society.

Examples of related KPIs
Above-mentioned leading KPIs, including the following, may be indicative of future
performance:- Adoption by SRI funds and more generally signatories to the United Nations Principles
for Responsible Investment;- Credit rating;- New product ratio and revenues from new products;- Change in the per-customer earnings.

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Appendices
Appendix 1: Comparison between the classifications of capitals by WICI and IIRC
Frameworks
The relationship between the three capitals covered by the WICI Intangibles Reporting
Framework and the six capitals covered by the International Integrated Reporting
Framework.

The International <IR> Framework

The WICI Intangibles Reporting Framework

Intellectual Capital

Organizational Capital

Human Capital
Capitals

Social and Relationship Capital

Intangibles

Human Capital
Relational Capital

Financial Capital
Manufactured Capital
Natural Capital

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Appendix 2: Economic Characteristics of Intangibles 16
In economics and management studies, intangibles are recognized to have certain
relevant characteristics which make them distinct and unique within organizations. In
addition, these intangible resource are generally linked to various forms of knowledge inand around the organization and its people.
Excludability: partial or full avoidance of access and eventual use by others (e.g., limited
and vague property rights, IP spill-over, global antagonism).
Non-rivalry (or non-scarcity): possibility to have simultaneous access and/or use (e.g.,
software).
Non-tradability: inability of exchange in a market. (e.g., limited exit strategy, sunk costs,
limited hedging – no future markets).
Risks: potential loss of value (e.g., inability to cope with change, possibility ofdisappearance due to bad reputation, high level of uncertainty related to outcomes andto the timing of these outcomes).
Scalability: possibility to increase the quantity and the quality without a correspondent
increase in cost(s) (e.g., software reproduction).
Pervasiveness: possibility to be naturally disseminated (e.g., network effects).

These economic characteristics of intangibles are drawn and elaborated from Chapter 2 (pp. 21-49) of the book by
Prof. Baruch Lev, Intangibles. Management, Measurement, and Reporting, Washington, D.C.: Brookings Institution
Press, 2001.
16

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Appendix 3: Differences from Accounting Definition
Under accounting standards, “intangible assets” have a common definition. For example,
IAS 38 defines them as follows:【Definition of intangibles under international accounting standards】
Intangible Asset: an identifiable non-monetary asset without physical substance. An
asset is a resource that is controlled by the organization as a result of past events (e.g.,purchase or self-creation) and from which future economic benefits (inflows of cash orother assets) are expected.
Thus, the three critical attributes of an intangible asset are:•identifiability•

control (power to obtain benefits from the asset)•

future economic benefits (such as revenues or reduced future costs)” 17

As previously observed, for the purposes of this Framework it is not necessary that
intangible assets are owned or controlled by an organization. They simply have to beavailable and/or utilized by it to generate value.
In the actual life of an organization, intangibles are interrelated and often converted
from one into another (e.g. knowledge to patents). It is sometimes difficult to draw a
sharp line between and among intangibles.
This can fail to qualify as “identifiability”, one of the critical attributes of an intangible
asset as defined in accounting. Nonetheless, the fact that intangibles are difficult to
identify is inherent in their nature.
Goodwill is a special intangible in accounting. Goodwill is an intangible asset that arises
as a result of the acquisition of one organization by another for a premium value over thefair market value of the acquiree’s net assets. Therefore, goodwill incorporates someintangibles that cannot be determined from the amount reported on the face of thebalance sheet.
17

See IASB: IAS 38, paras. 8 and 11-17; US GAAP: FAS 141(R), FAS 142, ASC 350.

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Even though under certain circumstances an internally generated intangible – such as
development cost – is allowed to be capitalized according to IFRS, the vast majority ofinternally generated intangibles cannot be recognized in financial reports under theaccounting standards.

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Appendix 4: Extant principles for reporting and communication of intangibles
The following are the Frameworks which provide Reporting Principles referenced by the
WICI Intangibles Reporting Framework.
Organization

International Integrated Reporting Initiative （IIRC）

Framework

International Integrated Reporting Framework (2013)

URL

http://integratedreporting.org/wp-content/uploads/2015/03/13-1208-THE-INTERNATIONAL-IR-FRAMEWORK-2-1.pdf

Principles

Guiding Principles
A Strategic focus and future orientation
B Connectivity of information
C Stakeholder relationships
D Materiality
E Conciseness
F Reliability and completenessG Consistency and comparability

Organization

The European Federation of Financial Analysts Societies Commission on Intellectual Capital （EFFAS CIC）

Framework

Principles for Effective Communication of Intellectual Capital

URL

http://effas.net/pdf/setter/EFFAS-CIC.pdf

Principles

Ten principles for the disclosure of intangibles – our perspective
1. Clear link to future value creation
2. Transparency of methodology
3. Standardisation
4. Consistency over time
5. Balanced trade-off between disclosure and privacy
6. Alignment of interests between company and investors
7. Prevention of information overflow
8. Reliability and responsibility
9. Risk assessment
10. Effective disclosure placement and timing

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Appendix 5: Examples of Interrelatedness between KPIs
Example 1: Connectivity of KPIs for the Manufacturing industry with a high percentage
of R&D investment“How facility investment, R&D investment and labor cost are visualized by KPIs”•

Creating new products based on the close relationship with manufacturing partners
such as factories and wholesale traders (Relational capital) → number of meetings
with client → number of prototypes/number of pipeline/number of presented items
at exhibition → new products-to-sales ratio/new products-to-net profit ratio.

•

Developing and improving products based on consumers’ demand→feedback system
and amount of feedback from call center, SNS (social networking service), sales
situation, sales persons/number of good claims→number of new products/number of
improved products→new products-to-sales ratio/new products-to-net profit ratio.

•

Organization with technology specialized for a specific area, such as apharmaceutical organization →the growth of the market and technologicaldirection → number of recruits for specific skills → number of products in thepipeline → number of patents/market share → new products-to-sales ratio/new
products-to-net profit ratio.

Example 2: Analysis of Value Creation Process at 3M JapanThe following logic tree analysis clarifies the connectivity between the organization’s
strengths and non-financial KPIs for reporting:

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Logic Tree for 3M Innovation

M

(＋S)

Ability to connect
customer needs to
3M technology(＋S)
H
Ability to collectcustomer needs

I
Ability to utilize
3M Technology
Platforms

M
3M Innovation

6 Types of Capital in Octopus Model
F：Financial Capital（Aqua）
M：Manufactured Capital（Brown）
I：Intellectual Capital（Blue）
H：Human Capital（Green）
S：Social and Relationship Capital（Orange）

M
Ability to createbusiness

N：Natural Capital（Purple）

M(＋I)
Ability to realize &
validate ideas

(＋F)
M
NPI /
Commercialization(＋H)
S#1: No of customer visits byengineers(＋H)
S#2: No of visitors to CTC
I#3: No of Technology Platforms
I#4: No of newly planned
Technology Platforms
H#5: No of awardees whochallenged new ideas(＋S)
I#6: No of Tech Forum EventsF#7: Actual sales results (NPVI)
F#8: NPVI: 37%@2017 (Global
3M Target)

Source: presentation by Mike Masahiko Kon (3M Japan Vice President/WICI Japan Vice Chair) at 12th World Congressof Accounting Educators and Researchers, Florence (Italy), November 14, 2014.

Example 3: Other Examples
The following existing examples of Guidelines can also be helpful in identifying andselecting KPIs from the perspective of each organization’s unique value creation story.
•

FRENCH GUIDELINES “Thésaurus-Bercy V1” - Référentiel français de mesure dela valeur extra-financière et financière du capital immatériel des entreprises” (2011)
http://observatoire-immateriel.com/wp-content/uploads/2015/11/Thesaurus-Volet1.pdf•

GERMAN GUIDELINES “Intellectual Capital Statement – Made in Germany”(2004)
http://www.akwissensbilanz.org/Infoservice/Infomaterial/Leitfaden_english.pdf

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•

DANISHGUIDELINES“AGUIDELINEfor

INTELLECTUAL

CAPITAL

STATEMENTS - A KEY TO KNOWLEDGE MANAGEMENT” (2002)
http://ufm.dk/en/publications/2001/files-2001/a-guideline-for-intellectual-capitalstatements.pdf•

MERITUM GUIDELINES “Guidelines for Managing and Reporting on Intangibles(Intellectual Capital Report)” (2001)
http://www.pnbukh.com/files/pdf_filer/MERITUM_Guidelines.pdf

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Glossary
Asset (in accounting
according to the IASB)

An asset is a present economic resource controlled by
the entity as a result of past events.
An economic resource is a right that has the potential toproduce economic benefits.

Audience of the
Framework

Any type and size of companies and other organizations
belonging to the private, public and not-for-profit
sectors, which can adopt the Framework.

Business Reporting

A form of reporting which focuses on qualitative(narrative), quantitative, financially and non-financiallyexpressed information about the past, present andfuture value creation process of an organization and thestrategy, the resources (especially of intangible nature),
the governance and the organizational model which
support it.

Business Sustainability

Capacity of an organization to sustain its value creation

Financial Value

Value linked to the generation of net cash flows overIntellectual Capital

process over time.

time.
Intellectual Capital encompasses the internal(competencies, skills, leadership, procedures, know-how,etc.) and external (image, brands, alliances, customer
satisfaction, etc.) intangibles which are dynamicallyinter-related and available to an organization, thereby
enabling it to transform a set of tangible, financial andhuman resources into a system capable of pursuingsustainable value creation

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Key Performance Indicator KPIs are numerical figures (metrics) related to(KPI)

critical/material factors of value creation, and whichshould provide objective evidence of performance trends
by tracking them over time.

Lagging Indicator

Indicator which refers to the performance achieved andLeading Indicator

Indicator which has a predictive capacity and may referto the performance to be achieved. It is future-oriented

past events. It is therefore past-oriented in nature.

and it is generally based on present events or
phenomena.
Liability (in accounting

A present obligation of the entity to transfer anaccording to the IASB)

economic resource as a result of past events.

Measurement

The determination of size, capacity or quantity

Negative Intangible

Intangibles that may have substantive negative impact

Resources (Intangible
Liabilities)

on the organizational business and/or financial value(e.g., bad reputation of the organization; poor
management quality and leadership).

associated with an object, an event or one of its
characteristics

Intangible liabilities are often linked to specific risks ofthe organization.
Non-Financial(or Non-Monetary)

The term "non-financial" is utilized in this Framework
to refer to narrative or quantified information that is not
expressed in monetary units (e.g., percentage, Likert
scale, absolute number, physical measures). Nonfinancial' does not mean that a measure or information
does not have a financial impact or significance.
Sometimes the expressions “non-monetary”, “extrafinancial”, “pre-financial” or “not yet financial” are usedsynonymously with “non-financial”.

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Performance

The past, present or the future outcome of the value

Positive Intangible
Resources (Intangible

The drivers of sustainable competitive differentiation
and advantage. They derive from a strategic utilization

Assets)(including the combination) of intangibles that are
conducive to an organization’s sustainable businessvalue and/or sustainable future cash flow stream.

Primary information users

The organization’s management as well as the providersof the Frameworkof financial capital including investors, creditors, andanalysts.

Reporting

The process aimed at the measurement andStrategic value

Value related to the enhancement of the competitive,

Value creation mechanism

System through which an organization’s value iscreated.

Value creation story

Narrative explanation – often supported bycreation process of an organization.

communication of information about organization’s
activities and outcomes. It can be both internally andexternally oriented.

market, product, reputation, and/or risk profile of theorganization.

quantitatively expressed information – about theinterconnected events which have occurred andgenerated the organization’s value.

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WICI Governance Group Members (as of September 2016)
Jean-Philippe Desmartin (Oddo Securities, WICI France, and WICI Europe)
Amy Pawlicky (American Institute of Certified Public Accountants – AICPA, andEBRC/WICI USA)
Takayuki Sumita (METI and WICI Japan)
Stefano Zambon (EFFAS and University of Ferrara) (Chair)

Expert Advisors
Ami Beers (AICPA)
Yasuhito Hanado (Waseda University, Tokyo, and WICI Japan)

Lead of the Technical Working Group
Mariko Mishiro

World Intellectual Capital/Assets Initiative

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