Cover paper (Agenda Paper 21)

The purpose of this session was to ask the IASB to make active the intangible assets project and discuss the initial work the staff will undertake. The IASB was not asked to make any decisions in this meeting. This project will move from the research project pipeline to the research work plan.

Summary of national standard-setter research (Agenda Paper 17A)

This paper summarised the recent search performed by national standard-setters (NSS) on the topic of intangible assets.

The NSS research highlighted a range of stakeholder concerns about accounting for intangible items applying IAS 38. In particular, a concern that the financial statements do not provide sufficient information about unrecognised internally generated intangible assets and hence do not reflect key value drivers of the business. The staff identified mixed views on how to remediate this concern and whether the focus should be on recognition of more internally generated intangible assets or improving the requirements to disclose information about unrecognised internally generated intangible assets. Many stakeholders also highlighted the inconsistency between accounting requirements for acquired and internally generated intangible assets and the effect this inconsistency on comparability. Lastly, the search performed indicated there are requests for consistent terminology to be used.

The staff asked whether the IASB members have any comments or questions on the summary of NSS research.

IASB discussion

IASB members expressed gratitude to the NSS. Many IASB members believe that the starting point of the project should focus on what the problems are that the IASB is trying to solve. One IASB member asked for more information on why intangible assets are one of the most frequent key audit matters and to isolate whether the challenge is in respect of the requirements of the standard or the difficulties in the application of the standard. Some IASB members said the focus should be on ensuring the comparability and reliability of financial statements as they progress through this project. Most of the IASB members said that a common theme from the research is the importance of disclosure and asked whether the IASB can take on a short-term project on disclosures of intangible assets. Other IASB members expressed concerns with this approach as they believed this can result in a duplication of effort if disclosure requirements are developed before recognition and measurement requirements. One IASB member asked whether the staff could consider different phases for the different types of intangibles items. The staff had considered this but expressed concerns regarding the practicality of this approach. IASB members agreed that the research highlighted a contrast in information that is important to users versus preparers. Some IASB members suggested that the staff perform further research to identify best practice disclosures in relation to intangible items available in the market to inform the direction of this project.

Academic literature review (Agenda Paper 17B)

This paper summarised evidence from academic papers on topics the IASB might explore in its project on intangible assets. This review does not include academic papers on the topic of goodwill because these have been covered in the business combinations—disclosures, goodwill and impairment project and the IASB has not decided to what extent, if any, goodwill will be part of a project on intangible assets.

Some academic papers showed that financial statements may not capture the full value of internally generated intangible assets, suggesting a need for modification of accounting standards. While other academic papers showed that changes to current accounting standards may not be necessary because the income statement provides information about unrecognised internally generated intangible assets. There is consensus about improving information disclosed, either by amending disclosure requirements or providing guidance about the disclosure of voluntary information.

The staff asked whether IASB members have any comments or questions on the academic research presented. 

IASB discussion

One IASB member observed that the academic research showed that current disclosures around intangible items do not have all the information that stakeholders would require. Another IASB member echoed this observation and considered that users of the financial statements are interested in information from the intangible assets recognised (i.e. amortisation and impairment) rather than which intangible items are included in goodwill. One IASB member observed that research showed that stakeholders did not believe that not having physical substance is an important characteristic of intangible item. One IASB member highlighted considerations around remeasurement of certain types of intangible assets such as cryptocurrency and whether those remeasurement gains or losses should be recognised in other comprehensive income.

Project commencement (Agenda Paper 17C)

This purpose of this paper was to provide the IASB with an overview of the initial work the staff plan to undertake in the intangible assets project.  

Based on the research conducted, the staff have identified topics that the IASB might explore in the project. These include:

• Scope
• Definition of intangible assets
• Recognition
• Measurement
• Disclosure

The staff considered three project approaches, “all-in-one”, “early evaluation” or “phased” approach. The “all-in-one” approach would consider all topics identified by stakeholders,  While the “early evaluation” approach would require the IASB to assign priorities to the topics identified by the stakeholders and the staff would only explore topics that meet a specified threshold. Lastly, the ‘phased’ approach would require the IASB to focus on one topic at a time and other topics are explored and consulted upon separately.

The staff asked whether the IASB members have any comments or questions on the staff’s plan for initial research on the scope of the project and how best to stage the work.

IASB discussion

Most IASB members agreed that they should consider what the issues are that the IASB is trying to solve before deciding on the scope of the project. Thereafter, the IASB can consider the approaches to address the problems. One IASB member highlighted that throughout this project, the IASB should also be cognisant of the impact on interim financial statements. Another IASB member said that if the project will address recognition and measurement concerns, the starting point should be the Conceptual Framework.