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 will enable the UKEB to fulfil its 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:
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.
The quantitative report builds on the qualitative report findings. In particular, this report aims to provide further quantitative information, including:
To develop this evidence, the report will draw on a “three-tiered” analysis examining:
We are currently developing a survey instrument to use with investors to develop an understanding of their perspectives on the current and future reporting of intangibles in the financial statements.
We would be interested to hear from academics who have or are currently undertaking similar research.
Contact us at firstname.lastname@example.org if you would like further information.