There is growing consensus that traditional financial reporting (TFR) does not provide a complete picture of the strengths and weaknesses of a business instead giving a snapshot of past financial performance. In the wake of a string of recent corporate collapses, it has become increasingly evident that the traditional financial reporting framework is insufficient in providing even the information that it purports to include. Research has shown that accounting information has lost its relevance significantly in the last few decades. Lev and Zarowin (1999), for instance, have documented a deterioration in the usefulness of reported earnings, cash flows and book values over the past 20 years.

In the rise of the knowledge-based economy, intellectual capital (IC) is gaining importance over traditional tangible assets and is increasingly acknowledged as an important source of competitive advantage. The balance sheet does not adequately reflect a company’s future success, which is based, to a large extent, on many strategic intangible resources (such as human resources, access to technology, brand reputation and networks of relationships with other companies). Brennan and Connell (2000, p. 206) indicated that elements of IC not recognised under the traditional financial reporting framework could explain some of the differences between market and book value. Information on a company’s activities for integrating, creating, transferring and applying IC can provide a more forward-looking view of the company and enable an understanding of how the company’s value is created or diminished.

Furthermore, the concept of sustainable development has underlined the long-standing criticism that the traditional financial reporting framework gives only an incomplete account of business activities. Gray et al. (1996, p. 2) indicate that economic activity is producing an increasing number of environmental and social problems and that these consequences are not reported under the traditional financial reporting framework. For some time, critics have argued for the benchmarking of company performance against non-financial aspects such as environmental and social performance. Heard and Bolce (1981) have indicated that societal expectations are no longer confined to profit generation and the provision of goods and services. The importance of reporting social and environmental (SE) performance has begun to attract greater attention since the report of the World Commission on the Environment and Development (WCED), Our Common Future, in 1987, which put sustainable development firmly onto the international political agenda. According to Elkington (1998) and WBCSD (1999), sustainable development involves the simultaneous pursuit of economic prosperity, environmental quality and social equity. The concept of sustainable development points to the need for companies to report information on other impacts of their business activities and not just the financial bottom line.

In summary, recent developments such as the string of accounting scandals, the rise of the knowledge-based economy, and the greater attention towards sustainable development have drawn ever-increasing attention to the shortcomings of traditional financial reporting in presenting company value and performance. Two major limitations of the traditional financial reporting framework are: (1) it provides only monetary financials; and (2) the information provided is targeted for financial users, namely investors or creditors.

Research has focused on reporting information that is not provided under the traditional financial reporting framework (e.g. IC, balanced scorecard (BSC) and social and environmental (SE) reporting). However, the focus of this research has been narrow. Briefly, the focuses of IC and the BSC have been placed on the way in which internal strategic intangible resources are used to create and deliver products and services that are valued by customers, thereby delivering superior economic performance. In contrast, the focus of SE reporting has not been on economic performance, but rather on the impact that an organisation may have on society. This study considers that reporting either IC or non-economic performance information is significant, yet incomplete. It argues that economic and non-economic performance should be reported. In addition, an assessment of economic performance should not be made only from information currently provided in, or able to be derived from, the traditional financial reporting framework. It considers that economic performance can be better illustrated via the reporting of IC information. Since IC information allows users to understand and visualise value-creating processes within a company, it is argued that reporting of IC information enables better presentation of strengths and weaknesses of a business’s ability to deliver not only economic, but also non-economic performance. Therefore, there is a need for reporting both IC and non-economic performance information.

An Extended Performance Reporting Framework (EPRF), which comprises both IC and non-economic performance information was developed by Yongvanich and Guthrie (2004) from the integration of theoretical perspectives and reporting elements of IC, BSC and SE reporting. Both IC and non-economic performance information are expected to be of greater interest to stakeholders in the contemporary operating context. The EPRF, which is a framework for considering provision of both IC and non-economic performance information, is expected to enable companies to satisfy the information needs of a broader group of stakeholders and to provide a more complete account of an organisation’s value creation and performance. Also, it addresses the two major limitations outlined above.

Prior research has tended to examine either the reporting of IC information or non-economic performance. In addition, there have been few studies that examined the extent of disclosure of both IC and non-economic performance information. Based on the EPRF, this study conducts content analysis of the annual reports for the financial year 2002 of Australian mining companies to assess their voluntary disclosure of both IC and non-economic performance information. The results of this analysis will be presented.

This paper is organised as follows. The next section briefly reviews prior research on IC reporting. This will show that prior research on IC reporting has focused on supplementing information for economic performance-based decision-making but not non-economic performance information. The following section briefly describes stakeholder theory whilst the fourth section presents issues that arise from mining activities. The paper then proceeds to describe the research methodology employed in this study and the penultimate section then presents the results of this study. The final part provides concluding remarks.

The traditional financial reporting framework has been criticised for over-emphasising objectivity and reliability at the expense of relevance. Despite the important role IC plays in creating competitive advantage in the knowledge-driven economy, it is unlikely that IC will be incorporated into the traditional financial reporting framework. According to the definition in IAS 38, intangibles are recognised as assets when they generate a flow of benefits that are likely to accrue to the company, and which can be measured reliably.