INTHEBLACK July 2022 - Magazine - Page 9
audit of disclosed information and a potential loss of
competitive advantage through disclosing proprietary
or commercially sensitive information.
Rather than immediately tackling the more difficult
challenge of recognising internally generated intangible
assets on the balance sheet or waiting until those
challenges can be met, the paper puts forward the idea
that the current perceived information gap around
intangibles could be, at least in part, addressed through
specified disclosures about unrecognised internally
generated intangible assets. Such disclosures should be
underpinned by:
• a principle that intangible asset disclosures should
•
focus on those significant internally generated
intangible assets that play a key role in pursuing the
entity’s objectives; and
a
disclosure objective that any information provided
enables users to assess the current and expected
future financial impact on the entity and
management’s stewardship of those disclosed
intangible assets controlled by the entity.
The paper also suggests that consideration should be
given to disclosing a range of factors for each significant
unrecognised internally generated intangible asset,
including the reason it is considered to play a key role
for the organisation, any legal considerations or
restrictions, its useful life and a range of financial and
non-financial factors.
PHASED APPROACH
While there are costs associated with incorporating
more information on intangible assets into financial
statements, the benefits to investors and other users of
such information should not be ignored.
Following a recent agenda consultation to establish
the program of works for the next five years, the IASB
has decided to include a research project to
comprehensively review IAS 38. In pursuing this project,
the IASB staff is proposing a staged approach and,
similar to the focus of the AASB staff paper, a focus on
enhanced disclosure requirements could be the first
stage of that project. Further stages in the IASB project
could also include a review of the scope of IAS 38 and a
review of the definition, recognition and measurement
of intangible assets.
The AASB is also expected to initiate a research
project on the topic, as noted in its recent agenda
consultation. The AASB is expected to deliberate
this topic during 2022, with a view to including
an intangible assets research project into its 20222026 program of works.
While the focus of the IASB and AASB projects is on
the reporting of intangible assets in financial
statements, the interaction between these projects and
the development of sustainability reporting standards
by the International Sustainability Standards Board
(ISSB) needs to be kept in mind.
Given that the focus of the ISSB’s work is on the
reporting of sustainability related risks and
opportunities that affect Enterprise Value – or the sum
of the value of the entity’s equity (market capitalisation)
and the value of the entity’s net debt – there will be an
overlap between the disclosure of information on
intangible assets in financial statements and the
reporting of information about intangibles in the context
of the sustainability of the entity’s business.
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