1 Introduction
The primary purpose of this essay is to comparatively analyze information disclosure of intellectual capital in the UK and China, using the content analysis method on company annual reports. In contemporary society, the importance of intellectual capital (IC) and the popularity of using IC to value a company’s competitiveness have been increasing. The definition offered by the Chartered Institute of Management Accountants (2001) is probably one of the most comprehensive definitions: “…the possession of knowledge and experience, professional knowledge and skill, good relationships and technological capacities, which when applied will give organizations competitive advantage.” Predicting a company’s future market performance is one of the key functions of IC information disclosure (Roslender and Fincham, 2004). Consequently, IC will have a significant role in the future value creation process.

This study has some limitations, such as the small sample number, which has implications for how representative the data are. Ten companies in the respective stock markets were selected in the UK and China (total twenty) and content analysis was performed. A larger sample would have made the calculations too complex for the time available. The following paper reports the results of empirical research indicating that the trend of IC information disclosure is steadily increasing in both China and the UK, indicating that British companies had a better approach than Chinese companies to disclose IC. The study has identified common ground while preserving differences to obtain an advanced and suitable method of disclosing IC information. The essay will firstly define IC in detail. Secondly, it will illustrate the research objects and methodology. Thirdly, it will analyze the results comparatively. The final section will indicate the conclusion and present some solutions regarding how IC information could be disclosed more efficiently in the future.
2 Definition
There are many varied definitions of IC but Galbrainth first formally defined it in 1997. To begin with, IC is one kind of intangible asset because a significant amount of IC can be captured within the standard accounting definition of intangible assets such as the International Accounting Standards (Petty and Guthrie, 2000). In addition, IC can be defined as the knowledge-based resources of an enterprise. Companies increasingly rely on IC in their value creation process (Ricceri, 2008) and potential investors in the market may gain positive guidance from the disclosure of IC information. Moreover, the framework of IC has developed many times; Brooking’s (1996) framework, which divided IC into three different categories including internal structure, external structure and human capital, has been used by researchers extensively over these years (Mohanmmad, 2005). This essay will use a framework based on Brooking’s framework to separately analyze ten annual reports respectively from Chinese and British companies. The framework of IC in this essay is not only based on the work of previous analysts, but also incorporates new content which is more suitable for the analysis of Chinese and British IC disclosure information.

3 Research objectives and methodology
This section explains the research objectives and the methods used in this essay. The main objective of this paper is to comparatively analyze the IC information disclosure of China and the UK from the results of empirical research, which primarily focuses on the trend and type of IC information being disclosed during the years from 2011 to 2013. The following sections provide more details.

Using content analysis in annual report
Content analysis was reported as a reasonable methodology which is used to collect IC information (Mohanmmad, 2005). The original definition of content analysis is “a research technique for making replicable and valid inferences from data according to their content” (Krippendorff, 1980). Due to the difficulties of defining and quantifying IC (Henry, 1999) – for example, there are many IC factors cannot be recognized quantitatively – using content analysis is a commonly applied method of ascertaining the information flexibility of IC. Although there can be potential limitations, such as a high margin of error and over-subjective analysis, this method could be used effectively if there is a suitable IC framework setting.

The reason for selecting companies’ annual reports as a basic sample is that an annual report has the function of fully disclosing material and relevant information to the public (Haji, 2012). Besides the annual report, there might not be another document which can particularly reflect IC information. In order to analyze the trend and amount of IC disclosure, this paper will select ten companies respectively listed in the Shanghai and London stock exchange as the sample and will conduct content analysis on these companies’ annual reports.

IC framework and the appraisal system
This essay follows the basic framework of Brooking’s (1996), using a large proportion of the framework applied by Guthrie and Petty (2000) and modifying some of the content of IC to make the framework more suitable for using content analysis in both Chinese and British annual reports. The detailed classification framework is presented in the following table (Table I) (Petty and Guthrie, 2000).

Due to the facts that many IC components in the Table I cannot be disclosed quantitatively such as enterprise culture, management philosophy and work training. After critically reviewing a considerable amount of literature, the study will use an appraisal system to value the disclosure situation of the sample companies’ IC information. This method has been used by many researchers (i.e. Petty and Guthrie, (2000) and Saverio, (2003)) and it is a feasible system, cooperating with content analysis, to obtain quantitative information about the level of IC information disclosure. Owing to the lack of research time, the future study should detail criteria more particularly. The following Table II is the appraisal system used by this study.

Sample selection and data source
This study randomly selected ten companies in stock markets listed in the UK (London stock exchange) and ten companies listed in China (Shanghai stock exchange). Using the simple random procedure in the sample selection is to guarantee the representation of data. For example, these random selected samples mostly come from different industries; consequently, it can ensure the results without the influence of industry. The source of the data was the annual reports from 2011 to 2013 (in total three annual reports from one sample company). In other words, there are sixty annual reports in total. However it is possible that further study needs to be done in a larger number of samples (Saverio, 2003), due to the limitation that only ten companies in each country can arguably not represent the whole IC disclosure of Chinese and British companies. 4 Research results and comparative analysis

Descriptive statistics
Table III shows the descriptive statistics with respect to IC disclosure.
From this table, according to the mean value of the overall index of the UK and China, it appears that the UK had a higher level of IC disclosure than China. In addition, the overall trends of these two counties are both increasing during the period from 2011 to 2013. According to the statistical results, the study shows that the IC disclosure in China and the UK tends to have developed over the last three years. The total index of disclosure on IC information for China and the UK on a yearly basis is depicted in Figure I. From the bar chart, the overall upward trend is clear. Other studies, such as Roslender (2002) and Vandemaele (2003), appear to show the same trend of IC disclosure in the UK. Although this previous research selected the data from different years, these similar increasing trends demonstrate that the popularity of disclosing IC in annual reports increased in this decade. Generally speaking, it is a positive trend of IC disclosure.

In the table III, statistical data from the results demonstrate that companies in China and UK disclosed more about external structure, compared to relational structure and human capital during the period from 2011 to 2013. By contrast, the minimal proportion of IC disclosure content was human capital in this study. These statistical results appear to be the same as others’ studies such as Vandamaele’s study in 2003, which claimed that firms disclosed more about external structure (Vandamaele 2003). Although different IC frameworks are designed in the different studies, the similar significance of external structure might prove the effectiveness of this study. Furthermore, it is apparent that during the three-year period, the value of Chinese companies’ SD (Standard Deviation) is lower than that of British companies; indicating that there were also many differences in IC disclosure between different companies in China.

Comparative analysis
According to the results of Table III, the overall index of IC disclosure in the UK was consistently higher than that in China. It tends to prove that IC disclosure in the UK was more practicable than that in China. Although the sample companies from the London stock exchange might belong to some global enterprises, some of them are also in the FTSE 100 index (Financial Times Stock Exchange) compared to some Chinese small listings, the difference of IC disclosure between these two countries should be brought to the forefront. Striukova’s study in 2008 indicated that the level of quantification of IC disclosure appears to vary with the size of company (Striukova, 2008). Hence, the company’s scale is one reason for this difference. Moreover, a considerable amount of Chinese companies are smaller than the British companies, as many companies listed in the London stock exchange have a relatively high market value which might mean these companies have more financial ability and advanced awareness than Chinese companies to manage, employ and disclose IC.

Another reason for the difference is the different developing levels of knowledge-based economies. “Knowledge is used as an input to produce knowledge-intensive products and services-based economies in the knowledge-based economies; in such economies, a firm’s growth crucially depends on knowledge accumulation, technical change and the resulting innovation activities.” (Seddighi, 2012). Although there are signs that Chinese companies are attempting to transfer the traditional developing models to the knowledge-based developing models such as improving the research input and recruiting high-educated talents, the whole market mainly depends on the primary industry and the secondary industry. That means, in China, not as much emphasis in being placed on IC as in the UK, which is a significant factor in the based-knowledge economy. Take human capital in table III as an example, the mean index of human capital in the UK is higher than that in China, due to the fact that a great deal of British companies had already changed the development model to make themselves more competitive in the knowledge-based economy, such as emphasizing the importance of human resources management (Rimmel et al, 2012). The popularity of using quantitative expression of IC information indicates that Chinese companies are approximately still at the level of understanding where the real value is instead of qualifying the IC attributes (Guthrie and Petty, 2000).

Since there is no established and generally-accepted model for IC disclosure standard report around the world (Yi and Davey, 2010), these two countries’ companies do not disclose some IC content quantitatively in detail such as “enterprise culture” and “work training”, although these IC content are theoretically difficult to disclose quantitatively. Hence, different companies possibly have different attitudes to IC disclosure. Without a standard model, companies do not have an appropriate mechanism to adequately measure and disclose their IC (Yi and Davey, 2010). In addition, the relatively high standard deviation in China from this study’s results is another indication of this phenomenon. Striukova (2008) found that a considerable range of corporate reports in addition to annual reports were used in the UK to offer IC information. By contrast, the voluntary corporate report in China which is requested by CSRC (China Securities Regulatory Commission) is the corporate social responsibility report, and only a few large companies disclose these corporate reports (which do not have the main function of disclosing IC). This one aspect demonstrates that different emphases on IC are also one of the reasons why the difference existed between the two countries according to the results.

Actually, as a result of a lack of any accepted model to provide the guideline of IC disclosure (Yi and Davey, 2010), it could be argued that neither the UK nor China discloses IC efficiently. For instance, companies cannot compare with others about IC disclosure, due to the fact that they all disclose IC in their own ways. This study suggests that a unique corporate report about IC disclosure should be requested in the future. In this report, a standard of IC framework should be defined to guarantee companies in the whole market share the same guideline for IC disclosure. According to the theory of efficient market, only if companies disclose sufficient information, can potential investors make the right investment choice. If unique corporate IC report obtains enough information and the function of IC are totally received by potential investors, the situation that “some firms only regard the development of IC as an internal management issue and therefore beyond the scope of the annual report” (Guthrie et all, 1999) would change comprehensively.

5 Conclusion
This study uses content analysis in the annual report to comparatively analyze IC disclosure practices from twenty samples of Chinese and British companies respectively in the period from 2011 to 2013. The result of this study has demonstrated that the UK has a higher amount of IC disclosure than China does. In addition, it also indicates that both the UK and China have the same increasing trend of disclosing IC and these two countries’ companies are more likely to disclose internal structure of IC. Although having the growing trend of IC disclosure, the differences of IC disclosure practices between these two counties is due to company scale, level of emphasis on the IC and stage of knowledge-based economy.

Despite limitations such as limited amount of samples and over-subjective appraisal system, this study shows the similar results of others’ research in the UK and China to prove the effectiveness of this study (e.g. Roslender and Fincham (2004), Yi and Davey (2010)). Ultimately, according to the fact that there is no global standard guideline of IC disclosure, In the future, this study suggests that a unique corporate report about IC disclosure should be required to guide disclosure of IC information more efficiently.

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