Into the Unknown

The search is on for common standards in accounting for intangible assets.
Eila RanaApril 7, 2008

The debate over accounting for intangible assets rumbles on, as common standards on how to measure trademarks, brands, databases and the like have yet to materialise.

Next month, the International Valuation Standards Committee, a London-based non-governmental organisation, will host a roundtable in New York to discuss how to determine the fair value of intangible assets under IFRS. Chris Thorne, vice chairman of the IVSC’s standards board, says that although the general reaction to a paper it published on the subject in the summer (which includes examples of standards) has been positive, two camps have emerged: one which supports its proposals, the other which supports its aim, but doesn’t want the standards presented in the paper to become mandatory.

Meanwhile, the IASB’s project on fair value measurement seeks to replace existing but disparate guidance on its standards with a single guidance that would apply whenever an asset — tangible or intangible — needs to be measured at fair value. The standard-setter published a discussion paper in 2006, to which the IVSC has responded, and is currently considering the comments it received. The IASB says that it remains open to further dialogue with the IVSC.

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The drive for a common method of accounting for intangibles is also gaining steam among investors. Last month, the European Federation of Financial Analyst Societies’ Commission on Intellectual Capital (EFFAS CIC) published ten principles for companies when valuing intangible assets for investors and analysts. “From our perspective, meaningful information on intellectual capital should be provided in a structured way, either within the corporate annual report or as a supplemental intellectual capital report,” says chairman Giampaolo Trasi.

It is ironic, however, now that the EFFAS CIC has added its input to that of the IVSC, IASB and FASB, that the array of associations making public pronouncements on the need to simplify accounting for intangibles is becoming every bit as confusing as the matter itself.