The IASB has launched a comprehensive review of accounting requirements for intangibles. It will assess whether the requirements of IAS 38 Intangible Assets remain relevant and continue to reflect current business models, or whether improvements should be made. 

This reflects concerns that IAS 38 is no longer adequate for the many transactions and assets captured in its scope – items that could not have been envisaged when the standard was developed almost 25 years ago.

In March 2021, as part of a five-yearly cycle of public consultation on its activities and work plan, the IASB issued a Request for Information on its Third Agenda Consultation. It requested stakeholder feedback on the IASB’s strategic direction and balance of activities, the criteria for prioritising financial reporting issues and views on issues to be prioritised. In its July 2022 feedback statement, the IASB committed to including intangibles in its research project pipeline. 

In its response to the Third Agenda Consultation, ICAEW observed the growing importance of intangibles in business models and recommended the IASB place high priority on undertaking a project on the topic. It strongly supported a comprehensive review of IAS 38; raising concerns about scope, different accounting treatments for internally generated versus acquired intangible assets, and measurement challenges. 

ICAEW also highlighted overlap between the potential scope of an intangibles project with other proposed projects for the IASB’s work plan, increasing its importance as a cross-cutting issue.

Consultation due

The IASB will now consult with its advisory bodies and other stakeholders to help inform the project plan. An initial research and planning phase aims to define the scope of the project and explore the best approach to plan and organise the work. 

In the UK, the UK Endorsement Board is carrying out an intangibles research project that explores how accounting for, and reporting of, intangible assets could be improved. This work will contribute to international consideration of this area.

Sally Baker, ICAEW’s Head of Corporate Reporting Strategy commented: “Having recommended a comprehensive review of intangibles as a high priority, ICAEW is pleased to see the IASB launch this major project. Intangible assets are a key factor in the creation of value for many entities in today’s world. It’s important that accounting standards evolve to reflect the types of transactions entities enter into and thereby ensure investors, and other stakeholders, are provided with relevant, decision-useful information.” 

The Corporate Reporting Faculty will be monitoring developments and will communicate key updates to members as the project evolves.