Intangibles Project

Introduction

The UK Endorsement Board is undertaking a comprehensive research project to consider how the accounting for, and reporting of, Intangible Assets could be improved to provide investors with more useful general purpose financial statements to assist them to make better informed decisions.

Intangible assets are expected to form a key part of the IASB’s future standard setting agenda. A pro-active thought leadership project on intangible assets supports the UKEB’s responsibility to proactively participate in the development of high-quality accounting standards by leading the UK debate on accounting and reporting of intangible assets as well as contributing to and actively participating in the international debate on a timely basis.

The project will:

Explore UK stakeholders’ views on the accounting for intangibles under International Accounting Standards.
Review the nature and extent of current reporting practices for intangibles among listed UK companies using IFRS standards.
Engage with investors to better understand their perspectives on the current and future reporting of intangibles in the financial statements.

Qualitative Analysis of Intangible Reporting in the UK

The UKEB published its report ‘Accounting for Intangibles: UK Stakeholders’ Views’ in March 2023. It sets out stakeholder views on the accounting for intangibles under international accounting standards within the context of the wider economic impact of intangibles in the UK. It provides an important foundation for future work the UKEB will undertake in response to the International Accounting Standards Board’s (IASB) proposed project on accounting for intangibles.

Economically, intangibles are an important determinant of companies’ performance and outcomes in financial markets. Whilst there has been a significant increase in the economic value of intangibles over the last 15 years, this increase can only be inferred indirectly as many intangible items are not recognised in national or company accounts.

UK stakeholders involved in the production and use of general-purpose financial statements were interviewed for the report and highlighted concerns about current IFRS Accounting Standards. These concerns included limited recognition, inconsistent accounting, and disclosure of intangibles, though some stakeholders expressed support for maintaining the current approach. The report also identifies a range of possible enhancements to the accounting suggested by stakeholders, particularly a desire for enhancing disclosures about intangibles.

Investors are primary users of financial statements, and the report shows that this group of stakeholders particularly supports more detailed disclosures on expenditure related to intangibles and qualitative information about key intangibles. This was especially true in instances, or for industries, where they are core to a company’s business model.

While the report does not reflect an official position of the UKEB, it will inform its future work, including further research and engagement with the IASB, and help it ensure that any future international accounting standard reflects the views of UK stakeholders.

Quantitative Analysis of Intangible Reporting in the UK

The quantitative report builds on the qualitative report findings. In particular, this report aims to provide further quantitative information, including:

Provide further and more granular evidence on the prevalence of intangibles among UK listed companies applying IFRS;
Explore the relationship between intangible assets and companies’ performance by reporting analyses conducted in-house on UK data; and
Examine whether the main concerns identified by stakeholders in the qualitative report are supported by examination of UK companies’ financial reports.

To develop this evidence, the report will draw on a “three-tiered” analysis examining:

financial data for UK listed companies;
a sample of companies’ annual reports; and
a limited number of industries/companies based on the actual or expected prevalence of intangibles, or other relevant factors (such as the prevalence of mergers and acquisitions).

Investor Survey

We are currently finalising the report on the responses received to a survey gathering users’ views on financial statements regarding two topics: the current reporting for intangibles under IFRS Accounting Standards, and what may be done to improve it.

We look forward to publishing the results around April 2024.

Other information

Background to the UKEB research project
UK Intellectual Property Office’s “Investing in innovation” event
- Seema Jamil-O’Neill, Technical Director at the UKEB, was a keynote speaker at the UK Intellectual Property Office’s “Investing in innovation” event on 19 March 2024. The event was hosted and addressed by the UK’s Minister for AI and IP Viscount Camrose at the House of Commons, and explored topics including IP financing and investment in the UK. Seema discussed the UKEB’s intangibles research project and the role of accounting in unlocking IP finance in the UK. It was clear from the discussion that followed that there is broad interest in the reporting of intangibles in the UK, and the work of the UKEB. Seema’s speech in full can be accessed here.