Reporting Intellectual Capital in Annual Reports: Evidence from Indonesia

This  exploratory  study  which  replicates  the  content  analysis  methodology  of  Guthrie et  all  (1999,  2004)  towards  Intellectual  Capital  (IC)  disclosures  in  the  annual  report  has set  several  objectives.  Primarily,  the  empirical  investigation  assesses  the  extent  to  which Indonesian  listed  companies  are  publicly  reporting  their  IC  both  the  amount  and  type  of information  being  reported.  Secondly,  the  investigation  also  examines  the  extent  to  which the various categories of IC are represented in the annual reports of the sample companies. Finally, the study explores the extent to which the level of IC disclosures could be related to companies' characteristics such as industry category, age, ownership structure and market capitalization.  The sample was Indonesia's 23 largest companies listed in the Jakarta Stock Exchange.  In  light  of  research  limitations,  the  preliminary  and  tentative  indings  of  this study  indicate  that  irst  of  all,  similar  to  indings  worldwide,  Indonesian  companies  have substantial intellectual capital and they do aware and disclose their intellectual capital in the annual reports. Secondly, IC that tends to be most often reported is relational capital, followed by human capital and organizational capital. Thirdly, even though the trend in IC disclosure as a whole is generally increasing, there is no conclusive and predictable pattern found.  Fourthly,  the  IC  identiied  and  reported  is  inconsistent  as  no  framework  available in  helping  the  companies  discloses  intellectual  capital.  Fifthly,  most  of  the  intellectual capital  components  identiied  are  in  qualitative  format.  Sixthly,  even  though  the  study  did not ind a conclusive evidence regarding the relationship between the level of  IC  disclosure and  company  characteristics  such  as  industry,  age,  ownership  structure,  and  market capitalization, however some indings are noteworthy. Finally, a comprehensive framework is yet to be developed, especially for collecting and reporting IC formation for consistency and comparability purposes. ");} 
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Introduction
There are three types of capital that organizations generally maintain and develop. They include physical capital, financial capital, and intellectual capital (Lev 2001). Physical capital refers to the traditional inputs of land, labor and capital, whereas, intellectual capital refers to knowledge, creativity, skills, and corporate culture (Goh 2005). Financial capital, on the other hand, refers to monetary items such as cash, receivables, and payables.
In the old economy, organizations rely on physical and financial capital. Such capital is generally disclosed under the traditional financial reporting. However, at present, there is a shift toward the economy in which organizations depend more on intellectual capital compare to physical and financial capital. Organizations are concentrating more on knowledge creation and less on physical items. This is a world in which concerns with tangible assets, like factories and land, diminish in relative importance (Guthrie 2001) and companies show a limited amount of assets on the balance sheet relative to the added value they produce, because they use lesstangible assets and because they have stripped their balance sheet of fixed assets (Andriessen 2004).
This so called new economy is driven by knowledge because increasing importance is being placed on maximizing the organization's intellectual capital (Zhou & Fink 2003) as featured by a higher productivity level and innovation rate (Chaharbaghi and Cripps 2006). The term "new economy" also refers to "knowledgebased economy", the "information age", the "third wave", "knowledge-driven economy", "knowledge-centric economy", and the "electronic economy" (Bontis, 2001).This research study seek to examine and examines the proposition that intellectual capital management is an important strategy to companies and that this will be reflected by way of disclosure of intellectual capital items in the firm's annual report. The research, which adopt content analysis as the main methodology, is intended to provide a better understanding of how Indonesian listed companies have responded to the challenge of reporting on intellectual capital.

Structure and Contribution of the Paper
The next section of the paper examines the prior literature which is limited to a intellectual capital and its reporting in annual reports. Research questions and research methodology will be followed. Then discussion of research finding will be revealed. The paper will provide some exploratory conclusions in light of research limitations. Avenues for future research will be offered as the last part of this article.
This paper makes a contribution to the literature in several ways. First, although it replicates the methodology developed by Guthrie et all (1999Guthrie et all ( , 2004, this is applied to a different sample in a different economy environment. Secondly, content analysis methodology conducted is enriched by extracting sentences and paragraph of intellectual capital disclosures from the annual reports. Thirdly, there is an attempt to explore possible relationship between intellectual capital disclosures and the company characteristics such as industry category, age, ownership structure as well as market capitalization.

Literature Review
Brief History of Intellectual Capital Sullivan (2000) explained that intellectual capital exploded into the business scene in the 1990s. Later, Guthrie (2001) have made a chronological review on the history of intellectual capital including the first development of intangible assets, the emergence of intellectual capital, and all related and significant events relating to intellectual capital measurement, management, and reporting as illustrated in Table 1.

The Definition of Intellectual Capital
Up to present, there is no consensus regarding the exact definition of intellectual capital. Zhou and Fink (2003) stated that it is difficult to define intellectual capital due to its invisible and dynamic nature. Andriessen (2004) argued that there are three perspectives in defining intellectual capital: knowledge, intellectual intangibles, and look beyond the brain. In the knowledge perspective, intellectual capital is limited only to knowledge applied to work to create value (Edvinsson and Malone 1997). Intellectual capital is a matter of broad organizational knowledge, unique to a firm, which allows it constantly to adapt to changing conditions (Mouritsen 1998). Finally, Sullivan (2000) concluded that intellectual capital is describes as knowledge that can be converted into profits.
Using the intellectual intangibles perspectives, the intellectual capital definition includes knowledge and other intangibles. Stewart (1997) defined intellectual capital as composed of the intangible assets of knowledge, skill, and information system, while Roos et al (1997) argued that intellectual capital refers to the sum of the knowledge of its members and the practical translation of this knowledge that is brands, trademarks, and processes. If Sullivan (2000) proposed intellectual capital as the sum of firm 's ideas, innovations, technology, general knowledge, computer program, designs, data, skills, processes, creativity and publications, Brooking (1996) defined intellectual capital as the combined intangible assets, which enable the company to function. General notion of intangible value (often generally labeled "goodwill"). Mid-1980s The "information age" takes hold and the gap between book value and market value widens noticeably for many companies.

Late 1980s
Early attempts by practitioner consultants to construct statements/accounts that measure intellectual capital (Sveiby 1997).

Early 1990s
Initiatives to systematically measure and report on company stocks of intellectual capital to external parties (e.g. Celemi 1999; Skandia Insurance Company 1998; The Swedish Coalition of Service Industries 1995). In 1990, Skandia AFS appoints Leiv Edvinsson "Director of Intellectual Capital". This is the first time that the role of managing intellectual capital is elevated to a position of formal status and given an air of corporate legitimacy. Kaplan and Norton introduce the concept of Balance Scorecard (1992). The scorecard evolved around the premise that "what you measure is what you get".
Mid-1990s Nonaka and Takeuchi (1995) present their highly influential work on "the knowledge creating company". Although the book concentrates on "knowledge", the distinction between knowledge and intellectual capital is sufficiently fine as to make it relevant to those with a pure focus on intellectual capital. Celemi's Tango simulation tool is launched in 1994. Tango is the firsat widely marketed product to enable executive education on the importance of intangibles. Also in 1994, a supplement to Skandia's annual report is produced which focuses on presenting an evaluation of the company's stock of intellectual capital. "Visualizing Intellectual Capital" generates a great deal interest from other companies seeking to follow Skandia's lead (Edvinsson 1997). Another sensation caused in 1995 when Celemi uses a "knowledge audit" to offer a detailed assessment of the state of its intellectual capital. Pioneers of the intellectual capital movement publish bestselling books on the topic (Kaplan and Norton 1996;Edvinsson and Malone 1997;Sveiby 1997). Edvinsson and Malone's work, in particular, is very much about the process and the "how" of measuring intellectual capital.

Late 1990s
Intellectual capital becomes a popular topic with researchers and academic conferences, working papers and other publications find an audience. An increasing number of large scale projects (e.g. the MERITUM project; Danish; Stockholm) commence with aim, in part, to introduce some academic rigour into research on intellectual capital. In 1999, the OECD convenes an international symposium in Amsterdam on intellectual capital (OECD 1999;. Finally, from the "look beyond the brain" perspective, intellectual capital as the organizations' competitive advantage, is equal to a company's core competencies (Viedma, 2001, Andriessen, 2004. Intellectual capital is intellectual material that has been formalized, captured and leveraged to produce a higher-valued asset (Prusak 1994) and it includes all factors critical to an organization's future success that are not shown on the traditional balance sheet i.e. future earnings capabilities (Edvinsson et al. 2005).
Even though a consensus has not been agreed yet on the definition of intellectual capital, there is a general understanding that there are three components of intellectual capital: human capital, organizational capital and customer capital (Bontis, 2001;Edvinsson and Malone, 1997;Roos and Roos, 1997;Stewart, 1997). Other literatures use structural capital for organizational capital, while customer capital is called either relational capital or external structure. Seetharaman et al. (2004), for example, classifies intellectual capital as follows: Human capital is represented in the more restricted sense of the know-how, capabilities, skills, and expertise of the human members of an organization (Roslender and Fincham 2001). Unlike organizational capital, organization cannot control and possessed human capital. However, Guthrie and Petty (2000) argued that from a value-based perspective they should be measured and placed on the balance sheet, as one cannot envisage an organization without employees.
Organizational capital which is also named structural capital, and internal structure includes organizational culture, patent, copyright, trademark, and information technology. These are usually created by the employees or are brought in (Guthrie and Petty, 2000). Organizations are able to make decision on organizational capital, that is, the management can determine to finance and create these items or remove them. Finally, relational capital which is also referred to external structure and customer capital, could be defined as the value of the relations that an organization maintains with the different agents of its environment (Martin de Castro et al. 2004). This consists of relationships with customers and suppliers, brand names, trademarks and reputation (Guthrie and Petty 2000). Meanwhile Andriessen (2004) argued that organizational, relational and human capitals are interrelated to one and another because people (human capital) work through technology (structural capital), and customers (relational capital) get services from people (human capital). 1

What is IC Disclosure?
IC disclosure also refers to IC reporting or IC statement. Mouritsen et al. (2002) explained that intellectual capital statement reports on firms' knowledge management activities -neither on the value of knowledge, the amount of knowledge, nor on the departments involved in producing knowledge. They report on organization-wide knowledge resources that in combination are capabilities, which make its possible for the firm to act -to do something.
The need for IC disclosure is stimulated by the demand of investors and financial analyst to get more reliable information on organization knowledge creation activities (i.e. IC). This means that an IC report should communicate the management's understanding of strategy and value creation, and not only shows indicators of general interest (Bukh 2003). 2 Mouritsen et al. (2004) contend that IC statements can be used as tools to communicate the knowledge-based strategy externally but it can also be used as an internal management tool. Moreover, IC statements attempt to show a firm has managed its knowledge resources and it therefore forms part of the firm's knowledge management activities.
However, unlike physical and financial capital, the disclosure of IC within the annual report is low as required by traditional financial reporting. Organizations generally disclose physical and financial capital but not IC. As a result, organizations are voluntarily disclosing intellectual capital in their annual report.
So far as the accounting framework on the definition and disclosure of intellectual capital, Guthrie (2001) indicated that the term intellectual capital is treated as being synonymous with intangibles assets frequently; However, historically the difference between those terms has been undetermined. At present there is no definition on intellectual capital provided by the accounting framework. However, the accounting framework has clearly defined intangible assets. 3 As organizations cannot fully disclose their intellectual capital in the balance sheet, organizations voluntarily disclose them as intellectual capital statement in their annual reports. Among the pioneers were corporations like the Swedish insurance company Skandia, the Danish company Rambol, and the Dow Chemical Company (Guthrie 2001). 4 Andriessen (2004) (Seetharaman et al. 2004) 2 Bukh (2003) further found that intellectual capital statements contain various financial and non-financial information. And using the definition of general purpose financial reporting as a basis, Abeysekara (2006) and Guthrie (2001) have defined intellectual capital disclosure as a report intended to meet the information needs common to users who are unable to command the preparation of reports about intellectual capital tailored so as to satisfy, specifically, all of their information needs. 3 Traditional accounting practice does not provide the identification and measurement of these "new" intangibles in organizations (Guthrie, 2001). New intangibles include customer lists, customer relationship, employee training, and employee satisfaction. Therefore, intangible assets are restricted to the structural part of the intellectual capital and they exclude human capital (Andriessen 2004) and relational capital (i.e. customer loyalty, supplier relationship). Intellectual capital does not (fully) appear in the traditional financial accounts, because the traditional financial accounting framework inadequately reflects the value and impacts of intangibles (Meer-Kooistra & Zijlstra 2001). Hence, accounting for intellectual capital will ultimately require the invention of new financial and management accounting concepts and practices. stakeholders about the real value and future performance of the enterprise, (c) reducing information asymmetry, (d) increasing the ability to raise capital and (e) enhancing corporate reputation and affecting stock price.

Empirical Research and Findings on IC Disclosures
Empirical research on IC disclosures within the annual reporting of organizations have been conducted by various researchers both in developing and developed countries. Guthrie and Petty (2000) studied the intellectual capital disclosures in Australia, while Bozzolan et al (2003) made the same research in Italy, Abeysekara (2000) in Srilanka , and Brennan (2001) in Ireland.
In Australian case, Guthrie and Petty (2000) found that (a) the key components of intellectual capital are not reported within a consistent framework when reported at all, (b) the main areas of intellectual capital reporting focus on human resources; technology and intellectual property rights; and organizational and workplace structure, and (c) there is no established and mutually agreed framework for reporting intellectual capital by companies as well as accounting profession. Brennan (2001), in the context of Irish companies, argued that the companies have substantial intellectual capital assets. However, Irish companies are currently making little progress in measuring these assets. Such assets are rarely referred to in annual reports and, when referred to, it is in the most qualitative terms.
Then, Bozzolan et al (2003) concluded that disclosure by Italian companies mainly occurs with regard to external structure (with particular attention to customers, distribution channels, business collaboration and brands). In addition, industry and size seem to be relevant factors in explaining the differences in reporting behavior amongst Italian companies.

Research Questions
There are three main research questions to be explored in this study. First of all: do Indonesian listed companies have intellectual capital assets? Secondly, to what extent listed Indonesian companies have intellectual capital components disclosed on their annual report and thirdly, to what extent company characteristics such as industry category, age, ownership structure as well as market capitalization could influence the frequency of intellectual capital disclosures?

Population and Sample
The population of this study is top 40 listed companies in Jakarta Stock Exchange based on market capitalization. Due to data availability, the sample of this study is only 23 (58%) top listed organizations covering 6 out of 9 industry categories in Jakarta Stock Exchange. The sample companies are summarized in the following table based on market capitalization.

Comparison between Market Values (Market Capitalization) and Book Values
Generally speaking there are three ways of measuring intellectual capital (Brennan, 2001). First approach is what is known as value-based measurement in which intellectual capital is valued as the difference between market value and book value. This is the most simple provided relevant information is available publicly. Second approach uses Skandia Navigator, developed by Skandia, a Swedish firm in 1994 to identify and quantify critical success factors in key dimensions of business. The third approach uses Intellectual Capital Index to measure the efficiency of intellectual assets by identifying (in terms of importance) and weighting key measures of success of a firm in order to provide a single summary index. (Roos et al., 1997). Brennan (2001) argues that the Skandia Navigator and the Intellectual Capital Index require information not generally publicly available and are more suitable for management use, whereas market-to-book value ratios are more suitable to external users of accounts.

Content Analysis of the Annual Report
Content analysis of the companies' annual reports is used as the main research method in this. It adopts the methodology developed by Guthri et al (1999,2004) and Guthrie and Petty (2000). In this case annual reports covering the period from 2002 until 2004 are collected. Content analysis is used in analyzing the data as the annual report is qualitative in nature (Sekaran, 2003). Sekaran (2003) further stated that content analysis is an attempt to quantify qualitative data by noting, for example, frequencies of events, words, actions, and so on'. 5

No
Listed  As a replication of Guthrie et al (1999) and Guthrie and Petty (2002), the variables to be measured are intellectual capital components as illustrated in Table  3. However, unlike Guthrie and Petty (2002) who use four-way numerical coding systems, this study adopts the following simple coding system: (see also Brennan 2001): 6 • 0 = Item did not appear in the annual report • 1 = Item appeared in the annual report in narrative form Expanding Guthrie and Petty (2002) work, this research uses two level of analyses as follows: 1. Analyses using the intellectual capital components mentioned by Guthrie and Petty (2000). 2. Analyses using the intellectual capital components mentioned by Guthrie and Petty (2000) plus the synonyms of the variables as disclosed in table 4 (on page 133) Finding from the second analysis will be used further to answer research question no. 2 i.e. whether the frequency of intellectual capital disclosures of the sample companies could be influenced by such company characteristics as industry category, age, ownership structure, and INDONESIAN CAPITAL MARKET REVIEW • VOL.I • NO.2 132 6 The four-way numerical coding systems include: 0 = Item did not appear in the annual report, 1 = Item appeared in annual report in narrative form, 2 = Item was given a numerical value in the annual report, and 3 = Item was given a monetary value in the annual report (Guthrie et al, 1999). market capitalization.
Moreover, dissimilar from Guthrie and Petty (2000) who exclude variables required by the accounting standards and the corporation law, this research study includes them in the unit of analysis. To extent the research, the researchers also look for sentences and paragraphs that represent or reflect intellectual capital types in general.

Company Characteristics
In this research study, company characteristics such as age, industry category, ownership structure and market capitalization are also considered in order to look for their relationship with the level of intellectual capital disclosures.

Age
In this research study, companies age could be classified into three categories as follows: "Young" companies whose age are less than or equal to 40 years , "middle age" companies with more than 41 but less then or equal to 80 years, "old" companies with more than 80 years old.

Result and Discussion
In this research study, a content analysis on annual reports of the sample companies has been conducted. The findings will be classified based on the research questions raised.

Research Question No.1: Do Indonesian Listed Companies Have Intellectual Capital Assets?
Based on market-to-book value approach, Table 9 reveals the value of intellectual capital (hidden value) in 23 sample companies as follows: 7 The table shows that listed companies in Indonesia do have intellectual capital, an average of 58% from the market value.

Ownership Structure
In this research study, sample companies are also categorized into two ownership structure. Firstly, companies whose majority shares are owned and controlled by the government (called as listed state-owned companies/S) and secondly, those whose majority shares are owned and controlled by non-government parties (called as listed private-owned companies/P). Table below reveals the ownership information.

Market Capitalization
Sample companies in this research are also classified based on their market capitalization: Small, Medium, and Largesized companies. Small-sized companies have market capitalization less then or equal to IDR 30.000.000.000, mediumsized ones have market capitalization more than IDR 30.000.000.000 but less then IDR 60.000.000.000, while large-sized Telekomunikasi Indonesia intellectual components used by Guthrie and Petty (2000) are used as the basis, the content analysis performed to 23 annual reports of listed companies at Jakarta Stock Exchange reveals the findings in table 10 below.

Research Question 2: To What Extent Listed Indonesian Companies Have Intellectual Capital Components Disclosed on Their Annual Report?
Using word as unit of analysis in which  capital disclosure for organizational capital, human capital, and relational capital had been increasing for three consecutive years. One could argue that Indonesian listed companies show more and more awareness and concern on the importance of intellectual capital and its disclosures. Looking at the intellectual capital types pattern in more detail, as illustrated in Graph 2, 3 and 4, one could see that disclosures on information system, education and customers dominate the those for organizational capital, human capital and relational capital respectively.
Expanding the content analysis to include the synonym of the variable as In summary, table 11 explains that Indonesian listed companies disclose more on relational capital compared to organizational and human capital during the last three years. Relational capital disclosures contribute an average of 84% of the IC disclosures for the last three years. Quite interestingly to note, companies share relatively the same proportion of disclosures for both organizational and human capital. This result reveal that Indonesian listed companies seems to concern and focus more on its external intellectual capital and less on internal intellectual capital.
Graph 1 below shows that intellectual   First of all, sample companies which disclose the importance of employee for long-term company sustainability: "As human resources are the company's most important assets, the focus of Antam's human resources strategy is continuous improvement" (Aneka Tambang, Annual Report, 2002). "Enhance and accelerate internal capabilities, human capital and organizational resources to generate healthy and sustainable business growth" (Medco Energy, Annual Report, 2003). "Indocement continues to regard its relationships with employees as vital to the long-term interests of the company' (Indocement, Annual Report, 2003). "Human Resources are a company's most valuable assets"(Kalbe Farma, Annual Report, 2002).
Secondly, sample companies which disclose their appreciation to external parties relationship. "The Company pays due attention on efforts to develop communities in its surroundings" When using sentence as the unit of content analysis, it is quite interesting to note that some listed companies do disclose intellectual capital in their annual reports. Surprisingly, some companies even stated explicitly "intellectual capital" and "human capital" in the reports. What follows are some quotes from the annual report to indicate the intellectual capital disclosures  Thirdly, sample companies which disclose the importance of information technology.
"Kalbe plans to increase the role of technology in all company activities. This in turn will increase market our competitive capabilities" (Kalbe Farma, Annual Report, 2002). "Without doubt, IT is an essential tool in building Bank Niaga's competitive edge, the backbone of our Premier Retail Bank concept" (Bank Niaga, Annual Report, 2002) "BCA has one of the most advanced banking technology platforms in Indonesia, facilitating an effective and integrated network that serves over two million transactions daily..." (BCA, Annual Report, 2004). "Bank BNI has been continuously developing its information technology (IT) system to support its business which is compatible to integrated Bank BNI's IT architecture to improve its customer services" (Bank BNI, Annual Report, 2002).
Furthermore, when using paragraphs as the unit of content analysis, it is notable that listed companies do disclose the importance of intellectual capital for them as explained below.
First of all, sample companies which disclose the importance of human capital within their annual report.
"As strategic assets, our employees are the Bank's drivers of human and intellectual capital development, and every manager has the primary responsibility to be a Intellectual Capital (a), intellectual capital components as identified by Guthrie and Petty (2000) Intellectual Capital (b), intellectual capital components as identified by Guthrie and Petty (2004) and the related synonyms people manager. As strategic partners, our employees are expected to add value to the Bank, and their individual development is treated as an investment" (Bank Mandiri, Annual Report, 2003). "Bank BNI recognizes that the crucial role of manpower plays as the Bank's primary resource in organizational value creation. Hence, management is committed to develop the Bank's manpower potential consistently and continuously" (Bank BNI, Annual Report, 2002 p.48). "Indocement realizes that a company's longterm objectives cannot be achieved without competent employees, strong work ethics, good teamwork and a continuous learning process or improvement in every facet of operations. Throughout 2004,Indocement was heavily engaged in various strategic human resources programs as part of the efforts to achieve the vision of Indocement of becoming the leading, low-cost producer of consistently high-quality cement in the Indonesian market. Productivity, efficiency and sustainability are the three key indicators that are constantly addressed in the management of human resources by Indocement, in the face of an increasingly competitive market and escalating operating costs" (Indocement, Annual Report, 2004 p. 30).
Secondly, sample companies which disclose the strategic role of relation to relational capital within their annual report.
"As of December 31, 2002, we already had significant relationships with more than 20 Government-related entities and more than 50 corporate customers, including telecommunication companies such as PT Telekomunikasi Indonesia Tbk and PT Indonesian Satellite Corporation Tbk, the national airline PT Garuda Indonesia, cement manufacturers PT Semen Gresik Tbk and PT Semen Padang, natural resource companies Pertamina, PT Aneka Tambang Tbk and PT Tambang Timah Tbk and the state-owned power utility PT Perusahaan Listrik Negara.
In addition, we have relationships with some of Indonesia's largest corporate groups including Djarum, Astra and Maspion" (Bank Mandiri, Annual Report, 2002). "As a responsible Corporate Citizen, United Tractors constantly strives to contribute to the nation and the public by providing the best service to its customers and aiming for the best results in every endeavor. The Company realized that financing played an important role in gaining customers. In this case, United Tractors has built relationship and cooperated with some financial institutions, such as banks, leasing companies, as well as trading firms from Japan" (United Tractors, Annual Report, 2002). "Indosat always considers the surrounding communities as its main partners in achieving mutual prosperity. Through various activities in 2004, we continued to participate in improving people's welfare and standard of living, particularly in the areas of education, social welfare and health care" (Indosat, Annual Report, 2004).
Thirdly, sample organizations which reveal the importance of organizational capital within their annual report.
"On the technology front, the Company has launched the implementation project of a Drilling Information System, which will enable the Company to improve accessibility, accuracy, and time of data supply, hence significantly improving the quality of critical decision-making process" (Medco Energy, Annual Report, 2003 p.42). "In order to achieve the Bank's vision of becoming a Regional Champion Bank, Bank Mandiri has implemented strategic excellence as a means of ensuring the sustainability of our long-term growth and pro profitability. This sustainability can be achieved by implementing effective strategies within a conducive and adaptive organization culture. Implementation relies on three critical fundamentals: quality, cost effectiveness and speed. Each of Bank Mandiri 's products and services must engender superior quality, cost effectiveness and reasonable speed, with the individual variables adjusted to achieve lasting customer satisfaction" (Bank Mandiri, Annual Report, 2004 companies operating in other industries category. One could argue that there is more and more concern on the importance of internal capability of the companies to win the business competition. As far as relational capital disclosures are concerned, except for companies operating in Trade, Service and Investment industry which shows decreasing trend, companies operating in all other industry categories indicates increasing trend in which those operating in Mining industry indicate the most significant positive trend. It is also worth to note that different from intellectual capital disclosures pattern in other industry categories which shows big gap between the frequency of relational capital disclosures and that of other two (organizational and human capital), companies operating in Trade, Service, and Investment industry disclose as many relational capital as human capital.
Finally, there are two industry categories i.e. Finance as well as Infrastructure, Utilities and Transportation indicate increasing trend for all components of intellectual capital disclosures. More graphs to support this phenomenon could be found in attachment 1.

Companies' Age
As shown in the following graphs, for all age categories, there is an increasing pattern for intellectual capital disclosures in which relational capital was ranked the first, followed by human capital and then organizational capital. However, they have different average increasing rate per year. Companies with less than 40 years age have an average of 6% increasing rate per year, while those with 41 to 80 years age having of intellectual disclosure 23% increasing rate and finally those with more than 80 years age having an average of 15% increasing rate. In other words, one could argue that companies in the "middle" age seems to be more concerned on the intellectual capital disclosures compared to those in the "young" and "old" age.

Comparison with Findings of Research in Other Countries
Compared to research in other countries, research findings on Indonesian case have both similarities and differences. Next paragraph will discuss about it.
First of all, similar to other research findings around the world Indonesian companies do have significant intellectual capital. And alike with Bozzolan (2003) studies, the Indonesian companies tend to disclose more of relational capital. It is different with that of Guthrie and Petty (2000) in Australian case where human resources, technology, intellectual property rights, and organizational and workplace structure are the main intellectual capital components disclosed.
Secondly, similar to Guthrie and Petty (2000) studies, Indonesian companies do not seem to disclose intellectual capital within a consistent structure. And there is also no joint agreed framework for disclosing intellectual capital provided by Indonesian companies as well as the accounting profession.
to year 2002 and 2003 when the frequency of intellectual capital disclosures of listed state-owned companies exceed quite significantly those of listed private-owned companies.

Market Capitalization
In this article, as far as market capitalization is concerned, sample companies are classified into three categories: small, medium, and large. The small classification is for companies that have market capitalization less then or equal to IDR 30.000.000.000 (19 sample companies). The medium classification is for those that have market capitalization more than IDR 30.000.000.000 but less then IDR 60.000.000.000 (3 companies) and the large classification is for those that have market capitalization more than or equal to IDR 60.000.000.000 (only 1 company).
Graphs 13, 14 and 15 do reveal an increasing trend in intellectual capital disclosures of companies in each market capitalization category. However, in average medium-sized companies have the highest frequency of intellectual capital disclosures followed by largesized and then small-sized ones during the last three years. For example, mediumsized companies have an average of Graph 16. IC Disclosures for Large-Sized Companies 2002-2004 Thirdly, similar to Brennan (2001) studies, the intellectual capital assets disclosed in annual report are most likely in qualitative format.
Fourthly, different with Bozzolan (2003) studies finding, company characteristics such as industry category, age, ownership characteristic, and market capitalization seem not influence the level of IC disclosures by sample companies. Nevertheless, Indonesian companies seem to show an increasing pattern of intellectual capital disclosures for all categories.

Conclusion
The study concludes five results. First, Indonesian companies have significant intellectual capital. Second, Indonesian companies do aware and disclose intellectual capital. Third, even though the trend in disclosing intellectual capital as a whole is generally increasing, there is no conclusive and predictable pattern found. Fourth, the main disclosure on intellectual capital by Indonesian companies is relational capital, followed by human capital and organizational capital. Fifth, the intellectual capital components identified is inconsistent as no framework available in helping the companies discloses intellectual capital. Sixth, most of the intellectual capital components identified are in qualitative format. Finally, even though the study did not find conclusive evidence regarding the relationship between intellectual capital disclosure and company characteristics such as industry, age, ownership structure, and market capitalization, the following issue is worth noting: • As far as the industry is concerned, except for companies operating in Mining industry, organizational capital disclosures reveals increasing pattern in other companies operating in all other industries categories. Furthermore, relational capital disclosures of companies operating in all industry categories, except for Trade, Service and Investment Industry, indicate increasing trend in which those operating in Mining industry indicate the most significant positive trend. It is also worth to note that different from intellectual capital disclosures pattern in other industry categories which show big gap between the frequency of relational capital disclosures and that of other two (organizational and human capital), companies operating in Trade, Service, and Investment industry disclose as many relational capital as human capital. Finally, there are two industry categories i.e. Finance as well as Infrastructure, Utilities and Transportation which indicate increasing trend for all components of intellectual capital disclosures. • As far as the age is concerned, it seems that companies in the "middle" age are more concerned on the intellectual capital disclosures compared to those in the "young" and "old" age. • It is also quite interesting to note that listed state-owned companies disclose intellectual capital more than listed private-owned companies do. • Even though there is an generally increasing trend in intellectual capital disclosures of companies in each market capitalization category, medium-sized companies have the highest frequency of intellectual capital disclosures.

Limitations
The researchers face several limitations in conducting the study as follows: • Sample companies for this research are limited, therefore findings cannot be generalized to the whole Indonesian listed companies • The term "intellectual capital" is new.

Avenues for Further Research
The study reported here is exploratory in nature. There is scope to extend the work conducted in several ways: First, further thorough investigation needs to be conducted to find significant relationship between the level of intellectual capital disclosures and company characteristics by comparing and contrasting more data from more sample companies covering longer period of time Secondly, findings of this research study needs to be further explored by interviewing managers of the sample companies and other relevant stakeholders in order to get more valid and reliable as well as comprehensive finding.
Thirdly, future research could also be expanded by taking into account the quality of the disclosure in the annual reports on a case study basis in order to get richer and deeper understanding of how companies reporting their IC.
In that case, there is a probability that Indonesian companies do not aware and understand of the term. • It is also possible to have listed companies disclose things that relate to intellectual capital but do not disclose the term explicitly.