- EFRAG discussion paper suggests three approaches to provide better information on intangibles
- The current accounting requirements for intangible assets is insufficient
- Joint submission recommends a comprehensive review of IAS 38 and strengthening disclosures around intangible assets
The CA ANZ/ CPA Australia joint submission on EFRAG’s discussion paper provides feedback in respect of the three options put forward to provide better information on intangibles:
- Approach 1 - Recognition and measurement in the primary financial statements
- Approach 2 - Information on specific intangibles in the notes to the financial statements or in the management report
- Approach 3 - Information on future-oriented expenses and risk/opportunity factors that may affect future performance in the notes to the financial statements or in the management report.
The current standard does not enable preparers to adequately reflect financial information about entities’ intangible value drivers. Although there are divergent views on how to address the aforesaid information gap, there appears to be broad consensus for a comprehensive review of IAS 38 and strengthening disclosures around intangible assets, to ensure it remains relevant in meeting user needs.
We believe, in the short-term, developing accounting requirements to establish effective disclosures on specific intangible assets appears to present a cost-effective solution compared to the other options. Other critical areas such as definition, scope, recognition, and measurement are likely to present additional challenges that would be best addressed through a long-term project.
However, whilst the submission supports developing additional disclosure requirements to address the current information gap on intangible assets, it stresses that any proposed disclosures should meet the qualitative characteristic of “verifiability” and be capable of being independently assured by an external auditor.
EFRAG Discussion Paper
Better Information on IntangiblesRead more