7 Intangible Assets

26 March 2026 Agenda Paper 7

Executive Summary

Project Stage

Project Type

Research Project

Project Scope

Significant

Purpose of the paper

This paper asks for Board's feedback on some preliminary thoughts on development of a principle-based approach to accounting for intangibles.

Summary of the Issue

The Board agreed to undertake a pro-active research project on accounting for intangible assets. At the October 2026 Board meeting, the Board approved a twin track approach to this research – a ‘top-down' approach, grounded in the 2018 Conceptual Framework¹ to identify the key elements that could support the development of a principle-based standard for intangibles and a ‘bottom-up' approach, focused on exploring issues via case studies.

This paper focuses on the ‘top-down' approach, the workstream that considers key elements that could support the future development of a more principles-based standard for recognition, measurement and disclosure of intangible assets.

The UKEB's previous research on the accounting for intangibles highlighted structural weaknesses that suggest that intangible accounting is in need of a principle-based overhaul. This paper identifies three key stages that could underpin the development of a principle-based framework and asks for Board's feedback. These key stages are:

• Stage 1: Identification of key weaknesses and gaps.
• Stage 2: Evaluating targeted amendments versus full revision.
• Stage 3: Creating a unifying objective and an overarching principle.

Decisions for the Board

Recommendation

N/A.

Appendices

N/A.

Introduction

1In 2022 the UKEB initiated a research programme project focused on understanding UK stakeholders' views on the accounting for intangibles and gathering evidence about the UK intangibles landscape. The UKEB research work comprising three reports²³⁴ that included a qualitative assessment and quantitative analysis of intangible reporting in the UK, concluding that there are opportunities to enhance the development of intangible reporting.

2Building on that work and consistent with the UKEB's thought leadership mandate, the Project Initiation Plan⁶ for the intangibles project (approved by the Board at its October 2025 meeting), highlighted that research on this area will combine two complementary workstreams⁵:

1. The top-down approach. This approach grounded on the 2018 Conceptual Framework⁷ identifies the key elements that could support the development of a principle-based standard for intangibles.
2. The bottom-up approach. This approach involves the development of case studies as a means of exploring users' views on accounting for intangibles, and to test future IASB proposals (including recognition, measurement and disclosure).

Ultimately the objective is to bring the top-down and bottom-up approaches together by aligning high-level principles with real-world evidence to create a coherent, practical model for intangibles.

3At its October 2025 meeting the Board noted that this work provides an opportunity for the UKEB to demonstrate leadership and influence the IASB's direction, helping to ensure that future standard-setting remains principle-based.

Objective

4This paper focuses specifically on the top-down approach. It identifies three key stages that could underpin the development of a principle-based framework for intangibles.

1. Stage 1: Identification of key weaknesses and gaps.
2. Stage 2: Evaluating targeted amendments versus full revision.
3. Stage 3: Creating a unifying objective and an overarching principle.

5The IASB has successfully applied those key stages in the development of IFRS 15 Revenue from Contracts with Customers⁸.

6IFRS 15 arose from a convergence project between the IASB and the Financial Accounting Standards Board (FASB)⁹ (“the boards”) to clarify the principles for revenue recognition. IFRS 15 replaced IAS 18 Revenue and IAS 11 Construction Contracts, as well as several related associated interpretations.

7Before IFRS 15, accounting for revenue under IAS 18 and IAS 11 was fragmented, rules-based, with few, inconsistent underpinning principles¹⁰. In addition, several related interpretations and agenda decisions had been issued, creating additional rules to address specific types of arrangements¹¹. This led to significant diversity in practice and disclosures that often failed to reflect economic reality of the underlying transactions.

8Considering how those stages were applied in the development of IFRS 15 offers a useful jumping off point for developing a principle-based approach to accounting for intangible assets due to the parallels with the challenges now seen with IAS 38.

9The feedback we receive from the Board at this meeting will help shape the scope and direction of the future work in developing a principle-based approach for intangibles.

1. Stage 1: Identification of key weaknesses and gaps

10The tables below highlight the main weaknesses noted in IAS 38 and outlines their implications for financial reporting. It also sets out key questions to consider when developing a principles-based approach for intangibles.

Outdated requirements /Fragmented rules and interpretations

Conflicting principles

Misalignment with the Conceptual Framework

Lack of guidance for newer types of intangibles

Inadequate or limited disclosures

Secretariat's views

11Taken together, these weaknesses suggest that intangible accounting is in need of a principle-based overhaul. This is also recognised by other international stakeholders too. This topic has featured as a priority on the IASB's agenda since its 2022 Third Agenda Consultation as a result of feedback from stakeholders around the globe.

Question for the Board

2. Stage 2: Evaluating targeted amendments versus full revision

12Building on the weaknesses identified on the accounting for intangibles (as part of Stage 1), the next step is to consider the approaches available for addressing those weaknesses i.e. targeted amendments versus full revision of IAS 38.

IFRS 15 precedent for considering a full standard replacement

13We start by considering the precedent set by IFRS 15. IFRS 15 (BC14–BC15) sets out that the two boards concluded that the weaknesses identified were too fundamental to be addressed via targeted improvements. They considered that limited amendments would not achieve the project's objective of a single, consistently applicable revenue model across IFRS Accounting Standards and US GAAP.

14As a result, the boards replaced the existing requirements with a comprehensive, principle-based framework that would ultimately enhance and consolidate previous requirements by:

1. providing a more robust framework for addressing revenue recognition issues;
2. improving comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets;
3. simplifying the preparation of financial statements by reducing the amount of guidance to which entities must refer; and
4. requiring enhanced disclosures to help users of financial statements better understand the nature, amount, timing and uncertainty of revenue that is recognised [IFRS 15, par. BC3].

Current direction of the IASB's project on intangibles

15In May 2025, the IASB clarified that its project on intangibles aims (emphasis added):

1. to improve the usefulness of information entities provide about intangible items in their financial statements; and
2. to update IAS 38 Intangible Assets, in particular to make it more suitable for newer types of intangible items and new ways of using them. [IASB Update May 2025]

16As reported in the June 2025 IASB Update¹³, the IASB's work is currently assessing user information needs and exploring potential updates to the definition of an intangible asset, related guidance, and aspects of the recognition criteria and has not committed to targeted amendments or to a major overhaul of the Standard.

Pros and cons: targeted amendments vs full revision of IAS 38

17The table below presents a comparison of the pros and cons of pursuing a targeted amendment to IAS 38 versus undertaking a full replacement of IAS 38 and potential questions that could be explored. In this table we have incorporated several views from UK stakeholders which were drawn on findings from previous UKEB research¹⁴.

Fuller revision of IAS 38 and potential replacement

Targeted amendments to IAS 38

Secretariat's views

18The Secretariat observes that the IASB is still in the research phase of its work on intangibles, and the UKEB therefore has both the time and the opportunity to influence the future scope of this project. We acknowledge that the IASB has already made some tentative decisions regarding the scope of the intangibles project. However, given the limitations identified in IAS 38, the age of the standard, and the rapidly evolving nature of the modern business environment, a more fundamental reconsideration of the standard may ultimately be required to address the underlying issues.

19The Secretariat notes that IFRS 15 took approximately eight years to develop from start of the research to finalisation of the standard (2006-2014). Whilst this may seem a long time to some, given the standards are rarely revised after their issuance it is important that sufficient time and stakeholder engagement takes place to ensure the resulting standard is future proofed. We consider that, revisiting IAS 38 should not necessarily be a lengthy process if prioritised appropriately. Narrowing down the scope of the work at the research phase creates a risk that the revised requirements will not be sufficiently long-term or future-proof to meet the needs of preparers and users.

20The Secretariat welcomes comments from the Board on pros and cons of both approaches – targeted amendments versus a fuller revision of IAS 38 – and on the key questions that could be considered for each approach.

Question for the Board

3. Stage 3: Creating a unifying objective and an overarching principle

21Building on the assessment of whether IAS 38 should be amended or replaced, Stage 3 turns to the question of whether a unifying objective and an overarching principle(s) should guide any revised approach to accounting for intangibles.

22The Secretariat's view is that transforming IAS 38 into a truly principle-based Standard would therefore require a single unifying objective and an overarching principle, much as IFRS 15 did for revenue recognition.

What is a unifying objective?

23A unifying objective sets out the fundamental purpose of a Standard. It explains what the Standard is trying to achieve, provides a conceptual anchor for the requirements and the direction for their consistent application. For example, for IFRS 15, the unifying objective in paragraph 1 is to (emphasis added):

"The objective of this Standard is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer."

Why IAS 38 needs a unifying objective?

24Although paragraph 1 of IAS 38 defines an objective, this does not function as a unifying objective. The Standard simply describes the scope and does not explain the direction in which the requirements are meant to lead, or the objective they are intended to achieve. This objective is reproduced below: (emphasis added):

"the objective of this Standard is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another Standard. This Standard requires an entity to recognise an intangible asset if, and only if, specified criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires specified disclosures about intangible assets”.

25The Secretariat thinks that a unifying objective for IAS 38 should focus, instead on the information the Standard aims to deliver. Creating this objective would likely require a closer examination of users' information needs, an area in which recent UKEB research has already provided valuable insight.

26An example of a unifying objective could be (emphasis added):

The objective of IAS 38 is to provide principles for recognising, measuring and disclosing intangible assets to help users understand their characteristics, their role in an entity's value-creation activities and the resulting economic benefits and uncertainties that arise.

What is an overarching principle?

27An overarching principle is the central high-level concept that guides the structure and objective of a Standard and that explains how this objective can be met. Having such a principle ensures that diverse fact patterns are interpreted through a consistent conceptual lens.

28IFRS 15 for example, includes an overarching (core) revenue-recognition principle grounded in the 2018 Conceptual Framework. Paragraph 2 of IFRS 15 is reproduced below (emphasis added):

"To meet the objective in paragraph 1, the core principle of this Standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.”.

Why IAS 38 needs an overarching principle?

29IAS 38 does not contain an overarching principle for intangibles recognition. Its requirements largely reflect the 1989 Framework for the Preparation and Presentation of Financial Statements. As observed in the UKEB research on intangibles,²⁷ this creates a conceptual misalignment and practical challenges in the following areas:

1. The definition of an asset;
2. The definition of control; and
3. The recognition of an asset.

The definition of an asset

30In the 1989 Framework an asset is (emphasis added):

"A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity".

31In the 2018 Conceptual Framework an asset is (emphasis added):

"A present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits".

32The contrast in the definitions have relevant implications for intangibles because:

1. Assets manifest as rights and therefore are intangible in nature. Some stakeholders observe that:
   1. this seems to capture a lot more intangibles than are generally recognised under IAS 38²⁸.
   2. this undermines the traditional tangible/intangible divide: "all assets are rights, so all assets are really intangible”²⁹.
2. The potential to produce economic benefits is sufficient to qualify as an asset. This contrasts with the requirements in IAS 38 requiring economic benefits to be probable to permit recognition.

The definition of control

33IAS 38 is anchored in the 1989 Framework's narrow view of control, which emphasises the need for legal rights to protect the intangible asset³⁰. In contrast, the 2018 Conceptual Framework explicitly rejects this limitation, noting that entities may control knowledge, know-how or other intangibles without legal protection e.g. by keeping information secret. UK stakeholders have highlighted that IAS 38's legal-rights focus is now out of step with modern business realities³¹. Consequently, the IAS 38 definition of control is now inconsistent with the new definition.

The recognition of an asset

34In IAS 38 for an intangible asset to be recognised it is required that:

1. it is identifiable (i.e. being separable and arising from contractual or legal rights³²); and
2. the expected future economic benefits that are attributable to the asset have to be probable³³.

35Under the 2018 Conceptual Framework, however, a 'right' can meet the definition of an economic resource even if the probability is low³⁴.

36An overarching principle could consequently be anchored in the 2018 Conceptual Framework's core concepts particularly “economic resources,” “rights,” and "potential to produce economic benefits” and this way provide a coherent basis for applying those concepts to a wide range of modern and emerging intangibles.

37To illustrate how an overarching principle for intangibles could be articulated, drawing on the 2018 Conceptual Framework, the principle might be expressed as follows:

Secretariat views

38Taken together these findings point to the need for an overarching principle in IAS 38. The Standard is not conceptually aligned with the 2018 Conceptual Framework nor with the economic reality of how value is created today in the contemporary business environment. The differences in the definitions of an asset, control and recognition create inconsistencies that, in the Secretariat's view, cannot be addressed simply by amending individual requirements.

39Feedback from UK stakeholders strongly reinforces this direction. They have emphasised the need for clear, comprehensive and a principle-based standard that is firmly grounded in the 2018 Conceptual Framework and that can address traditional and new forms of intangibles. As one investor observed as part of the UKEB intangibles research³⁵

"I am nervous about having too many rules and trying to create bright lines. A principles-based approach is better... I would prefer something that is more aligned with the conceptual framework. Is there really an asset here?"

40However, developing an overarching principle on its own would not be sufficient. In the Secretariat's view, a subsequent step would be to consider whether a consistent approach is required to enable entities to apply that overarching principle in practice. For example, in IFRS 15 the core principle is made operational through a structured five-step model³⁶ that translates the high-level concept into a series of clearly articulated requirements. A similar exercise may be appropriate for intangibles, but this form part of a later phase of analysis that the Secretariat could bring to a future meeting.

41The Secretariat welcomes the Board's views on how a unifying objective and an overarching principle for intangibles could be modelled, including any alternative approaches the Board would like the staff to explore as part of the next phase of analysis.

Questions for the Board

Feedback from AFIAG

42The Secretariat met with AFIAG members at their March 2026 meeting to gather their views on the key stages identified in this paper.

43Members did not disagree that IAS 38 is approaching a similar inflection point to that which preceded IFRS 15, where a change to IAS 38 is necessary given the increasing relevance of intangibles as drivers of value.

44Some members suggested taking a more pragmatic approach by focusing on key problematic areas and making targeted amendments (e.g. enhanced disclosures). Other members supported considering intangibles from a broader perspective to develop a fundamentally new approach. However, some cautioned that such a comprehensive rethink could take a considerable amount of time, which may not be ideal given the current importance of intangibles as drivers of business value.

Next steps

45The Secretariat is planning to bring to a future meeting a preliminary summary of the feedback received from stakeholders on the case studies discussed with the Board at its meeting on 29 January 2026, highlighting the key themes emerging from this engagement. This will include preliminary analysis of potential principles emerging from this research. This work will supplement and inform the ongoing work on developing a principles-based approach to accounting for intangibles.

Project timeline

46The proposed high-level project timeline is shown below. This provides a best estimate based on information known at this time.

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