Disclosure in View of Companies’ Increasing Intangibility: Book Value x Market Value

Abstract

Objective: To check if, as a result of companies’ increasing “intangibility”, Accounting has worked to develop ways to maintain the utility of accounting information for investment decision making.

Method: Exploratory study with a qualitative approach. The research is based on the list of the largest companies in terms of market capitalization, as published by Visual Capitalist in 2016. The evolution of the main stock markets in the North American market was analyzed for the past 15 years. It was verified that, between 2001 and 2016, the ranking of the largest companies by market capitalization changed from other economic sectors to the technology sector, where the five largest companies in the world, in 2016, were: Apple, Alphabet (holding of Google), Microsoft, Amazon and Facebook.

Results: The results disclose that the companies’ equity is lower than their market value. The market considers that part of the difference is due to the fact that accounting does not recognize the companies’ intangible assets, mainly in the new context of the digital economy.

Contributions: As the solution will not be achieved in the short term and Accounting needs to maintain its information characteristic, we argue in favor of the disclosure of its intangible items, even if in the Notes to the Financial Statements.