Background
This project would seek to develop a consistent approach to recognition and measurement of
intangible assets, including purchased and internally generated intangible assets not related to a business combination.
Although many support the approach taken in IAS 38 Intangible Assets, many also are concerned that guidance in IAS 38 is not sufficiently robust. The project would result in an amendment or replacement of IAS 38.
| Discussion at the October 2006 IASB Meeting
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The purpose of the session was to seek the Board's agreement with the scope and approach and the project plan. The project is led by the Australian Accounting Standards Board (AASB). The AASB staff presented the intended scope and approach and the draft project plan.
Background
The project is an IASB project, with FASB being kept informed of progress, rather than a joint IASB/FASB project.
Scope
The AASB staff identified the following topics that could be the subject of this research project.
- Topic A: Initial accounting for intangible assets acquired other than in a business combination (internally generated and separately purchased intangible assets)
- Topic B: Initial accounting for intangible assets acquired in a business combination
- Topic C: Subsequent accounting for intangible assets
- Topic D: Initial and subsequent accounting for goodwill
The AASB staff identified Topic A as the most suitable as a focus for the purposes of the Memorandum of Understanding (MoU), that is, achieving improvements to current requirements in the short term. This is mainly because the requirements for internally generated assets have not been subject to review for some time.
Topic B was considered not be a suitable topic for the Intangible Assets research program since this topic has been subject to relatively recent review as reflected in IFRS 3 Business Combinations and SFAS 141 Business Combinations.
Topic C was considered also to have potential to improve current requirements, but the AASB staff was of the opinion that improvement was unlikely to be achievable in the short term.
Topic D was excluded because of the degree to which current accounting for acquired and internally generated goodwill is entrenched under both IFRSs and US GAAP.
Accordingly, staff was suggested that the project should focus on Topic A comprising definition/identification, recognition, measurement, and disclosure/presentation with a particular emphasis on issues relating to identification and measurement.
Board members noted that the project should include Topic C, since Topics A and C interact, and improvements on both issues are required in the short term. The Board asked the AASB staff to prepare a discussion paper by January 2007.
Next steps
The Board intends to discuss the project again at the beginning of 2007 before making a final agenda decision.
| Discussion at the December 2006 IASB Meeting
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IASB Update for October 2006 reported the Board's discussion of the intangible assets research project and noted that 'The project will not encompass the requirements for the initial accounting for intangible assets acquired separately or in a business combination, or the initial and subsequent accounting for goodwill' (page 5).
The Board clarified that the intangible assets project should address intangible assets purchased separately; all others mentioned would be addressed in the business combinations project.
| Discussion at the January 2007 IASB Meeting
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Discussion of timetable for developing an Agenda Proposal
AASB staff participated in London and by video link from Melbourne.
The Board discussed the timetable for developing an Agenda Proposal for a joint IASB/FASB project to develop a new or revised accounting standard on intangible assets. The project is a Memorandum of Understanding item.
The Board agreed the proposed timetable, which envisages a Discussion Paper being issued in the third quarter 2009. However, many Board members expressed concern about the degree of detail in the papers submitted (and available on the IASB's Website), thinking it too much at this stage.
Concerns were expressed about the interaction of the intangibles project and other matters on the IASB's agenda, some of which should be regarded as precedential because they will equip the Board with the tools necessary to address the issues in the intangibles project. A Board member noted that one of the most important tools would be an agreed definition of an asset, as neither academics nor users nor standard-setters had yet agreed on a definition. Another would be to identify the appropriate measurement attribute. In addition, the project plan had to be realistic and identify who was going to undertake it and by when.
Board members noted that it in a recent meeting with users, some analysts had expressed concern about the recognition of internally-generated intangible assets. Those users were sceptical about the reliability of measurement of such items and suggested that disclosure of expenditure and the nature of the item might be a more useful substitute and enable analysts to value the asset.
Scope
The Board reconfirmed the scope of the project as examining the acquisition of intangible assets other than through a business combination (the latter are the subject of the revisions to IFRS 3 Business Combinations). 'Acquisition' included acquiring an intangible in an exchange transaction and through internal generation.
Another tension would be the dividing line between an intangible asset and a financial instrument, something that the IFRIC has had to address twice, in IFRIC 3 (since withdrawn) and IFRIC 12.
Assessment against IASB Agenda Criteria
The Board noted that the project met all the criteria for a Board Project. In pursuing the project, it would be important to involve the FASB staff at an early stage. The AASB staff expressed a desire to continue their involvement, although the lead staff would be IASB and FASB, as this was a MoU project.
The Board agreed that a Working Group would be useful. In addition, Board members suggested that staff meet with representatives of business sectors such as pharmaceuticals, telecommunications, film, computer software, etc, as these were sectors in which intangible assets arise most frequently.
The AASB staff will refine the Project Proposal with a view to reviewing it with the Trustees and SAC in the third and final quarters of 2007 such that the IASB can take a formal Agenda Decision in December 2007.
| Discussion at the April 2007 Joint IASB-FASB Meeting
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The Boards discussed the draft agenda proposal for a joint project to develop a new or revised accounting standard on intangible assets. The project is a Memorandum of Understanding item.
The draft agenda proposal was omitted from the observer notes.
Scope
The project will address the initial accounting for internally generated intangible assets and the subsequent accounting for all intangible assets. It will not encompass the requirements for the initial accounting for intangible assets acquired separately (in or outside a business combination) and the initial and subsequent accounting for goodwill.
Some IASB and FASB members were concerned about the scoping out of initial accounting for intangible assets acquired separately. One FASB member noted that particularly the initial accounting for intangible assets acquired by way of a government grant has not been adequately addressed in the existing guidance. Others raised the concern that addressing subsequent accounting without looking at initial accounting might lead to inconsistent outcomes.
The staff responded that the reason for scoping out initial accounting for separately acquired intangible assets was that this area is considered to be less problematic whereas there is indication that initial accounting for internally generated intangible assets and the subsequent accounting require immediate attention. In addition, the staff noted that the existing guidance on initial accounting would, of course, be considered.
The Boards agreed to explicitly point this out in the agenda proposal. Finally, there seemed to be a consensus to proceed with the scope as currently outlined in the draft agenda proposal. The Boards will provide offline suggestions for rephrasing the draft agenda proposal.
Assessment against IASB agenda criteria
The potential Intangible Assets project was compared to the IASB agenda criteria in the IASB's Due Process Handbook.
The Boards noted that the project meets all the criteria for an IASB project and that therefore the similar FASB agenda criteria would also be fulfilled.
Project plan and next steps
The IASB staff will revise the draft agenda proposal with a view to reviewing it with the Trustees and SAC in the third and final quarters of 2007 such that the IASB can take a formal Agenda Decision in December 2007.
In addition it was agreed that the revised draft agenda proposal is sent to the Boards for discussion at the next joint meeting in October 2007.
The FASB noted that it will appoint staff shortly to work together with the project team of the IASB.
Given the significance of the possible changes to IAS 38, the Boards tentatively agreed that the preliminary views of the Boards should be set out in a Discussion Paper. The target date for this Discussion Paper is October 2009.
| Discussion at the December 2007 Joint IASB-FASB Meeting
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Agenda Proposal: Intangibles
Staff from the Australian Accounting Standards Board (AASB) presented an agenda proposal for a project on intangible assets to be added to the IASB's and FASB's technical agendas. AASB staff noted that earlier drafts of the proposal were discussed with the IASB at its October 2006 and January 2007 meetings and at the joint IASB/FASB meeting in April 2007. The AASB staff presented a range of possible scopes for the agenda proposal:
- Specifying disclosures for internally generated intangible assets
- Resolving major definition, recognition and measurement shortcomings with IAS 38
- Specifying recognition and disclosure of intangible assets developed from a discrete plan, initially and/or subsequently measured at cost or fair value
- Specifying recognition and disclosure of internally generated intangible assets, irrespective of the manner in which they arise.
The IASB research director put forward the recommendation that the Board should not put the project on the agenda at this stage as this would be a major project.
A number of Board members expressed support for the director's recommendation, and noted that although the project was not urgent, it was an important project that should remain on the research agenda. The Board thanked the AASB staff for the significant amount of time and effort already invested in the project. The Board asked the staff to discuss the future of the project 'offline' with AASB staff and other national standard setters. It was suggested to the AASB staff that the scope of the intangibles project could be expanded to start with 'a clean sheet of paper' and revisit the fundamentals of accounting for intangible assets.
| November 2008: Research report on intangibles
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The Australian Accounting Standards Board (AASB) has published Initial Accounting for Internally Generated Intangible Assets, a discussion paper addressing the inconsistent accounting treatments for intangible. The discussion paper, authored by staff of the AASB, with the encouragement and support of the group of National Standard Setters (NSS), represents a significant step toward encouraging the International Accounting Standards Board to review its existing accounting standards relating to intangible assets.
Currently, accounting standards treat intangible assets acquired as part of a business acquisition differently from the same kind of intangible assets that are internally generated. Comments on this paper are requested by 15 May 2009. The AASB intends that comments received on the paper will provide valuable input into any future work on intangible assets that the IASB might initiate. In December 2007, the IASB rejected an agenda proposal on intangibles.
A key conclusion of the intangibles research report:
From a technical conceptual perspective, internally generated intangible assets should be required to be initially measured at fair value to enhance the decision-usefulness of financial reports. An option to adopt cost as an alternative to fair value should not be allowed. On balance, we also think that this view can be justified on practical grounds. However, we acknowledge the views of some against our conclusion. Accordingly, before our conclusion is considered for implementation, we think that further investigation of the perceived practical impediments is warranted.
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| February 2011: AASB questionnaire on initial accounting for intangible assets
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The Australian Accounting Standards Board (AASB) has created a worldwide online questionnaire to gather information from preparers, advisors, auditors and regulators on the initial accounting for intangible assets acquired under IFRS 3 Business Combinations and IAS 38 Intangible Assets (or similar GAAP).
The survey is a part of research being undertaken by AASB staff into the accounting for intangible assets under the aegis of the National Standard Setters (NSS) group. The results of the survey will be compiled by AASB staff and a report of the findings is expected to be provided to the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) as input to any future reviews they may conduct in relation to IFRS 3 and IAS 38.
The deadline for submission is 17 June 2011 (subsequently extended in June 2011 to Friday, 15 July 2011) and it is anticipated that the questionnaire will take approximately 20-30 minutes to complete. Click for:
| August 2011: AASB seeks user perspective on improvements to IFRS 3 and IAS 38
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The Australian Accounting Standards Board (AASB) has launched a survey of users of financial statements on the initial accounting for intangible assets acquired in business combinations under IFRS 3 Business Combinations and IAS 38 Intangible Assets (or similar GAAP).
The IASB considered a project proposal on intangible assets at its December 2007 joint meeting. The IASB decided that although a project on intangible assets was not urgent, it was an important project that should remain on the research agenda and asked the IASB staff to discuss the future of the project 'offline' with AASB staff and other national standard setters. In addition, the IASB Chairman at that time suggested that the research continue under the aegis of the National Standard Setters (NSS) group, with the IASB being involved through its usual representation as part of this group.
The survey of financial statements users follows on from a similar survey of preparers, advisors, auditors and regulators launched earlier this year and a separate Discussion Paper on intangible assets released in November 2008.
The survey is open until 15 December 2011. Click for access to the AASB survey (link to external website). More information is available in this AASB press release (link to AASB website).
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