The reports are an outcome of the UKEB’s comprehensive research project on accounting for intangibles that explored UK stakeholders’ views on the accounting for intangibles under international accounting standards, reviewed the nature and extent of current reporting practices for intangibles, and engaged with investors. An earlier report resulting from the project was the March 2023 Accounting for Intangibles: UK Stakeholders’ Views.

The first report Accounting for Intangibles: A survey of users’ views builds on a survey of users that was carried out in September 2023. The main message was that intangibles are economically important. While specific concerns were voiced regarding limited disclosure/connectivity, inconsistent categorisation, lack of comparability, and the subjectivity of measurement, users wanted no radical changes to recognition and measurement requirements, but rather more granular disclosures - preferably in the financial statements or the notes rather than narrative. Interestingly, while users noted that current accounting is not particularly useful for their investing and lending decisions and could be improved, they also indicated that they are utilising narrative information and making their own calculations, which in some cases would even give them a "competitive edge".

The second report Accounting for Intangibles: A quantitative review of UK Listed Entities was compiled following an examination of financial statement data on intangible assets reported by UK listed companies, a review of intangibles financial statement data of a sample of companies for, an investigation of M&A transactions, and an estimate of the value of unrecognised intangible assets in UK listed companies. The report notes that while intangible assets are widespread and increasing in value, they still only represent ~3% of the balance sheet, a few companies, particularly those that have grown through acquisition, hold most of the value of recognised intangibles, differences in accounting treatment for internally generated and acquired intangibles hamper comparisons of companies, and differences between recognised and estimated unrecognised intangible assets could indicate the existence of an intangible assets’ recognition gap.

Questions and reactions from the audience included that there is a difference between intangible assets and intangibles that don't meet the definition of an asset. In essence, it was agreed that there are three classes of intangibles: those that meet the definition of an asset and are recognised, those that would meet the definition, but are currently not recognised, and those that will never meet the definition. It was noted that it will be crucial for the IASB, that will commence its project on intangibles at the IASB meeting next week, to consider very carefully what sort of items will come under the project scope. It was also noted that it would be beneficial for the IASB to have similar research from other jurisdictions.

The reports will be published later this month. They will be available on this subsite of the UKEB website.