Chronology
Timetable
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
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
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
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
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.
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