by Michael Parrington, February 2013<\/p>\n
Do increasingly harmonised international accounting standards provide enterprises with improved scope to recognise and value their intangible assets?<\/strong><\/p>\n Intangible Assets are becoming the dominant means for creating value at the modern enterprise.[1]<\/a> Open any modern day textbook on business strategy and a focus on competitive advantage is evident. However, rather than only concentrating on financial capital or physical resources such as buildings, equipment, manufacturing facilities, or finished goods, instead strategy focuses on investments in non-physical intangible assets derived from human capital, social capital and organisational capital.[2]<\/a><\/p>\n Enterprises will develop investment strategies to obtain these physical and non-physical assets, with the expectation of growth and future income.\u00a0 An enterprise can achieve this through organic growth and creation of internally generated assets or by acquisition of another entities assets.\u00a0 It is suggested that the chance of enterprise success is equal with either growth or acquisition strategies, and that the typically large enterprise derives 30% of its income through acquisition.[3]<\/a>\u00a0 Therefore, the typical enterprise includes intangible assets that are both internally generated and acquisition derived.<\/p>\n Today\u2019s enterprise has intangible assets that account for more than two thirds of their value.[4]<\/a> In fact in 2007 the S&P500\u2019s value was derived from firms with an average of 85% in intangible assets, which had grown significantly from 38% in 1982.[5]<\/a> This trend of an increasing proportion of enterprise assets being non-physically derived intangible assets seems set to continue as more businesses look to intellectual property professionals to create new products and services. Many of these new intellectual property products and services will be from industries that don\u2019t exist today.<\/p>\n Accounting is the method used for representing business enterprise activities in monetary terms, so that an interested party can make informed decisions regarding the enterprises current, historical, and future potential performance.\u00a0 These figures are normally represented in a balance sheet, income statement, and cash flow statement, where the balance sheet is supposed to represent the assets that the firm owns against the liabilities (debt) and shareholders\u2019 equity of the enterprise.<\/p>\n Modern balance sheets can display a large disparity between the book value and the market value of an enterprise.[6]<\/a>\u00a0 It is perhaps concerning to note that even with the knowledge that an increasing proportion of value being derived from intangible assets, that there are still as much as 49% of enterprise value that is not captured and remains unrecorded on the balance sheet.[7]<\/a>\u00a0 This can be due to a number of factors, such as depreciation and inflation, misrepresenting long held tangible assets below market price or fair value,[8]<\/a> but is also due to the non-representation of intangible assets on the balance sheet.\u00a0 However, others propose an opposing viewpoint and have suggested that the balance sheet is in reality only a record of enterprise cost and not value, and should be left as such.[9]<\/a><\/p>\n With the understanding that intangible assets are important comes the realisation that in order to be recognised, an asset must have and be able to demonstrate a value for its owner.\u00a0 That is to say if an asset is to appear on an enterprise balance sheet, or form the basis of a legal damages or compensation, then it must be represented in a monetary term in a similar way to that of a tangible assets such as buildings. Moreover, not only should these intangible assets demonstrate a value, that value should be a fair, reasonable and realistic value. However, the realisation of such a value of an intangible asset is not a simple task and is open to considerable disparity due to reasoning for valuations, valuation methodologies, skill of valuation professionals, regulatory provisions, and case law.<\/p>\n Accounting standards are developed to improve the quality of financial information available to stakeholders of an organisation as well as improve the comparability between enterprises, by regulating the methods and criteria for identity, recognition, valuation, and ongoing disclosure in an enterprise accounts.\u00a0 With many enterprises currently operating, or seeking to operate beyond their own national borders, the creation of unified standards, by the harmonisation of national standards with international standards, seems sensible if it offers improved financial information to stakeholders and economic benefits to enterprises.<\/p>\n This paper aims to show the basic principles that exist today in regards to the identifying, valuing and disclosure of intangible assets and to highlight some of the relevant standards and what they mean in regards to accounting, as well as identifying some key elements to improve the scope for enterprises to recognise and value their intangible assets.<\/p>\n To help with a general understanding and provide an appropriate starting point it is important to consider how, in basic terms, an enterprise reports its assets, and the meaning and linkage between value, assets and property. According to the Blacks Law Dictionary<\/em> the definition of \u2018value\u2019 is \u2018the monetary worth or price of something; the amount of goods, services or money that something commands in exchange\u2019.[10]<\/a> An \u2018asset\u2019 is defined as \u2018a thing or person of use or value\u2019,[11]<\/a> and \u2018property\u2019<\/em> is defined as \u2018the right to possess, use, and enjoy a determinate thing (either a tract of land or chattel); a bundle of rights\u2019,[12]<\/a> or \u2018any external thing over which the rights of possession, use, and enjoyment are exercised\u2019.[13]<\/a><\/p>\n The point of looking at these three definitions is to note that the terms are inextricably linked.\u00a0 That is to say in order for an enterprise to recognise an asset, there must firstly be rights of ownership (property) in the asset, and secondly it must be able to prove a definite value.\u00a0 Another important point to note is in regards to the nature of an exchange, which represents a point in time, or to ensure that it is clearly understood, value is relevant to a particular point in time, and therefore the value of an asset is constantly changing.<\/p>\n According to accounting theory the method for an enterprise representing its assets and the claims against those assets (liabilities and shareholders equity) is the balance sheet<\/em>, where<\/p>\n Assets = Liabilities + Shareholders\u2019 Equity<\/p>\n In this way, accountants record the owned assets on an asset register that also assigns to each item a value at a point in time, which is commonly the end of an accounting period.[14]<\/a> \u00a0Against this a list of the liabilities, or requirements for the firm to pay money owing out, is also tabulated and a total sum is arrived at.\u00a0 The shareholders\u2019 equity is simply the difference between the sums of the recorded assets less the sum of the liabilities owing.<\/p>\n The relevance of this equation is where assets are not represented in the balance sheet and only represented \u2018off balance sheet\u2019. \u00a0\u2018Off balance sheet\u2019 value could include value that has been written down by depreciation, appreciation of assets that are only recorded at cost, as well as those of non-represented intangible assets.[15]<\/a> \u00a0In this case it can be assumed that if the \u2018off balance sheet\u2019 assets were represented on the balance sheet then the total value of assets would increase, without the sum of liabilities increasing, which should increase the value of shareholders\u2019 equity, such is the nature of the double entry accounting system.\u00a0 Therefore, due to \u2018off balance sheet\u2019 assets, the true value of the enterprise may not be represented correctly in the balance sheet.<\/p>\n Interested parties, such as investors or shareholders, should understand that due to items such as \u2018off balance sheet\u2019 assets, a disparity exists between the book value and market value of an enterprise.\u00a0 The easiest demonstration of this is with enterprises traded on the active stock markets. Here the market capitalisation of an enterprise will show an estimation of the total value of equity, by calculating the outstanding shares owned by the current market price of those shares. It is very relevant that the outstanding shares will have been sold by the enterprise during its public offerings at a different figure to the current market value of those shares, and that recorded book value figure will be in balance with the recorded asset values against recorded liabilities.\u00a0 In other words the market capitalisation only indicates the market expectation of the asset portfolio of the enterprise, it does not change the actual balance sheet of the enterprise.<\/p>\n Of course not all enterprises are publically traded, and the reason for understanding the value of an asset may not only be for investment purposes.\u00a0 There can be numerous reasons that valuations are completed on enterprise owned assets, which can include valuation for damages in litigation cases, a framework for understanding the potential value of intellectual property prior to commercialisation, the structuring of holding companies for tax purposes, allocations of business units for employee bonus schemes, and valuations for identifying assets for sale, to name but a few.[16]<\/a> The type of value that is considered is therefore dependant on the reason and type of appraisal that needs to be performed and to what means that valuation will be used.<\/p>\n It is reasonable to assume that the reader of this paper understands the concept of tangible assets and monetary fund assets.\u00a0 If you can see it and\/or touch it then it exists and it is intuitively understood that a value can be attributed to it, but when an item isn\u2019t able to be seen and\/or touched the realisation of value is not so intuitive.\u00a0 This is perhaps why International Accounting Standards Board (\u2018IASB\u2019) defines an intangible asset as an \u2018identifiable non-monetary asset without physical substance\u2019.[17]<\/a> Therefore the first component in valuing an intangible asset for representation on a balance sheet or for other purposes is to conceptually understand what can be deemed to be an intangible asset, so as to identify it.<\/p>\n According to the resource view of an enterprise its intangible assets, or intellectual capital, is sourced from human capital, social capital and organisational capital.[18]<\/a>\u00a0 In compliment of the tangible financial resources owned by the business, a strategic business leader will think in terms of using these intangible resources to develop strategies for creating differentiated products and services that will bring value to the business entity, some of which will become recognised as intellectual assets.\u00a0 This is to suggest that the enterprises resources are co-dependent and innovation is the key to the creation of intangible assets.<\/p>\n Human capital, as the name suggests, is based on the people working at the enterprise, and is derived from the knowledge, experience and skill of those individuals.[19]<\/a> The people who work at the firm will ultimately create, develop and manage products and services that will generate value for the enterprise.<\/p>\n Social capital includes the relationships that the business entity has with its networks and stakeholders, especially those from external individuals and business entities.\u00a0 The premise is that very few enterprises have the necessary resources to function independently and rely on relationships with its supply chain to enable differentiation.\u00a0 Customer relationships are obviously pivotal to value creation.[20]<\/a><\/p>\n Organisational capital is sometimes referred to as structural capital. It is the genesis of enabling the workforce to develop the opportunities to create value for the enterprise.[21]<\/a> At the highest level it is based on the values and beliefs of the enterprise leaders and how their beliefs trickle down to create an organisational structure enabling the human capital to utilise its knowledge.[22]<\/a>\u00a0 For example if the culture of the enterprise is to grow through the support of innovation then organisational resources will be afforded to projects that can develop intellectual assets.<\/p>\n From this base of human, social and organisational capital, and when specific knowledge can be clearly identified, described, can be shown to create or generate value, is owned by the enterprise, and is capable of being sold or transferred to an alternative business entity, then it can be described as an intangible asset. These owned intangible assets are normally defined by contractual legal rights, non-contractual relationships, intellectual property, or as goodwill.[23]<\/a><\/p>\n Contractual legal rights are written agreements that are in place between parties.\u00a0 There are many and varied types of contracts that can form the basis from which to generate income or create cost savings for an enterprise, either individually or in combination with other assets, and in this way show a value that is separable.[24]<\/a><\/p>\n Non-contractual relationships are akin to that described by the resource view as social capital, and are more difficult to separate. \u00a0However, relationships can be very valuable to an enterprise, and some enterprises will pay handsomely to acquire and leverage synergistic relationships. \u00a0For example recently there has been a focus on high quality talent, and some businesses have been acquired just to take advantage of the existing workforce.[25]<\/a><\/p>\n Intellectual property is perhaps the most important and easily understood of the intangible assets in the modern economy, and is created by legal rights that provide the owner with a \u2018monopoly right for certain types of imaginary property\u2019.[26]<\/a> Four different but related categories and associated rights for intellectual property exists: patents, copyrights, trademarks, and trade secrets.<\/p>\n Goodwill has been very difficult to define in any exacting terms and it is said that many have differing views on any accurate description. \u00a0Goodwill is perhaps best described as an earnings potential that is manifested as value that can-not be accounted for by all of the separable assets, intangible and tangible.\u00a0 For example goodwill might represent high market share, high profitability, positive reputation.[27]<\/a><\/p>\n An important point to note is that, by their very nature, each intangible asset is distinctive, and it is has been suggested that the value of an intangible asset is in part gained from how it is differentiated from other intangible assets of a similar type.[28]<\/a> \u00a0This is of course perfectly consistent with the business strategic approach, which is to use differentiation in order to gain competitive advantage, and is why intangible assets are valuable to enterprises.<\/p>\n \u2018The raison d\u2019etre of business assets is to provide a return on the investment required to obtain and assemble them\u2026 the greater the return, the greater should be the assets value\u2019.[29]<\/a> The purpose of the valuation is therefore to discover the value of the asset by quantifying the return to the business.\u00a0 The accepted methods for calculation of intangible asset values are therefore consistent with those of general financial theory, and fall into three categories: cost method<\/em>, market method<\/em>, and income method<\/em>.<\/p>\n The cost method<\/em> is based on the premise of assessing the cost of an intangible asset by measuring the value of a substitute asset, and falls broadly into two sub categories of reproduction cost or replacement cost.\u00a0 The concepts of functionality, being the ability to perform the same task, and utility, being the ability to provide an equivalent benefit, are important considerations for a valuation expert in both of the cost valuation methods.[30]<\/a><\/p>\n Reproduction cost is understood to be the current cost to make an exact duplicate of the existing asset,[31]<\/a> for example making an exact copy of an existing building.\u00a0 In this way the replica offers the same functionality and utility as the existing asset.\u00a0 However, and as mentioned earlier, intangible assets are distinctive and so the reproduction cost method is rarely used, with replacement cost usually being the most appropriate method.[32]<\/a><\/p>\n Replacement cost is the current price to recreate an asset that provides the same utility as the existing asset.[33]<\/a> The valuation appraiser would need to be aware that modern methods, materials and design may actually mean that a replacement could provide greater utility than the asset it is replacing, and that this should be taken into account when arriving at a valuation figure.[34]<\/a> At the same time it is important to factor in the changes to value apparent due to remaining useful life and how this can affect the current value of the asset.<\/p>\n In assessing the cost of creating an intangible asset it is also important to capture not only the obvious attributable costs such as labour and materials, but also the indirect costs and benefits of ownership of the asset.\u00a0 These indirect costs can be apparent from the remaining useful life, i.e. interest on capital invested.[35]<\/a><\/p>\n The benefit of the cost method is that it is easy to assess and collect relevant figures, and with good accuracy. However, its major pitfall as a valuation method is that it fails to capture the future benefits that might be realisable.[36]<\/a> Because of its pitfalls, the cost method is usually recommended as a check of values arrived at by alternative methods, but is also seen as the determinant of value that a shrewd investor would pay as a maximum for an asset.[37]<\/a><\/p>\n The market method<\/em> is discovering the price according to the Keynesian economic model, or where the demand and supply meet.[38]<\/a>\u00a0 In this way it is based on multiple recent historical transaction prices that have been paid for assets.\u00a0 To use this method effectively requires there to be an active market<\/em> where there are multiple willing sellers and purchasers, so that the asset price can be clearly identified.[39]<\/a><\/p>\n Where active markets exist the market method will produce the most accurate price for an asset, and is therefore in those circumstances it is the best method for valuing an asset.[40]<\/a>\u00a0 However, intangible assets generally do not fit directly into this category of an active market, and as such appraisers normally seek to use comparable assets that are readily traded as a benchmark for the valuation.\u00a0 This may seem straight forward, and there are many active public databases that can provide guidance for similar assets,[41]<\/a> especially for those assets bonded by similar royalty structures. In reality as the intangible asset becomes more unique the likelihood of finding a similar asset to benchmark becomes less likely. Moreover, where this comparable asset method is used the valuation appraiser must make adjustments for the differences, which can be exacerbated especially when the intangible asset forms part of a \u2018business combination\u2019.[42]<\/a> For example when valuing a business combination the valuation expert may look to the sale of a comparable company to see what the factor for price-earnings was in that transaction and use this as the basis for valuation, or for publically traded companies use the stock price.[43]<\/a>\u00a0 Being able to justify the reasoning behind the comparable is pertinent if it is to be used.<\/p>\n The income method<\/em> is the method preferred for asset valuation by the financial specialists as it seeks to discover the value of investments being made today through analysis and understanding of the future benefits and costs associated with that investment.\u00a0 From an enterprise strategic position the income method is used for capital budgeting and qualification of a project in financial terms, where management teams analyse the future benefits against risks so as to decide whether a project is worthwhile pursuing.[44]<\/a>\u00a0 The common technique used by enterprises is discounted cash flow modelling, and it is also a method utilised by valuation appraisers for discovery of asset value.<\/p>\n Discounted cash flow is based on the premise of incremental income, the time-value of money, and the risk versus return trade-off. Effectively it is the discovery of the incremental cash flows that will occur due to ownership of the intangible asset versus those that would be achieved without the intangible asset, and where those future incremental cash flows are tempered by the discounting for risk.[45]<\/a><\/p>\n Incremental cash flows require a detailed discovery process to arrive at a projected income statement, or future sum of money, for the life of the intangible asset.[46]<\/a>\u00a0 The calculation of the incremental cash flows is only for those cash flows that would not have occurred or be apparent if the intangible asset did not exist or was not utilised.\u00a0 This tends to require a detailed understanding of the business together with detailed and supported business plans, normally developed through a capital budgeting process.\u00a0 However, in some cases cash flows can be discovered more easily, for example where a company licenses out a technology and can be benchmarked. In this case the relief from royalty model, where estimations are made of the royalty that does not have to be paid for use of a technology due to ownership, can be utilised.[47]<\/a><\/p>\n To this stage the future sum is calculated without risk being accounted for, but in reality each project carries risks to varying degrees.\u00a0 Enterprise and relevant project risk can come from many and varied sources,[48]<\/a> but it is easy to understand that the chances of future income being realised from a contracted license for use of technology, or a building, is less risky than that of a project for a new technology that has just applied for patents.\u00a0 The risk that is specifically relative to a project is taken into account through what is known as discounting relative assumptions made to arrive at the risk-adjusted discount rate.\u00a0 In simple terms discounting is the reverse of compound interest.[49]<\/a><\/p>\n The risk-adjusted discount rate seeks to assist in discovering the present value of a future sum by adjusting the cash flows for inflation, uncertainty as to whether or not the cash flows will be achieved, and the opportunity cost against an alternative investment.[50]<\/a> There are various ways to arrive at a relevant risk-adjusted discount rate, with the most common being the application of a risk premium specific to for the intangible asset project, being added to the weighted average cost of capital relevant to the enterprise.[51]<\/a> \u00a0Problems associated with this are that the capital asset pricing model assumes a diversified portfolio, which assumes no unsystematic risk,[52]<\/a> and thus it has little relevance if valuing an individual asset. Moreover the current methodology to arrive at a risk premium for intangible assets is open to significant individual assumptions due to little theoretical guidance.[53]<\/a><\/p>\n The other issue with discounting is that it does not account for the variation of risk over the life of an intangible asset.\u00a0 For example a pending patent recently applied for may be a highly risky investment requiring a very high-risk premium to be applied to its projected cash flows. However, that same patent two years later may have been granted a full patent right and so its risk premium would be significantly lower. \u00a0Of course management could also decide not to continue with a patent application if they discover alternative technologies offering similar utility, or if the patent is relatively weak in giving a monopoly. There are various methods that have been used to try and capture this variation in risk over time and make appropriate variations to the relevant risk premium in different periods or to different decisions, such as decision tree\u2019s and real options.\u00a0 However, these methods still provide significant margin for error in terms of the decisions that can be made as situations change and accordingly to the valuation of intangible assets, and add vast complexity.[54]<\/a> Decision trees and real options are perhaps more as a benefit to strategic and business planning and capital budgeting rather than valuation.[55]<\/a><\/p>\n The income method is detailed and normally requires specialised financial knowledge to use effectively. The important point to derive in regards to valuation from the overview of the income method is that it is subject to significant variation depending on the assumptions that are made by the people predicting the incremental cash flows and risk premiums.\u00a0 In terms of the valuation of intangible assets this perhaps is clearly demonstrated by an understanding of the risk-return trade off and standard distribution, that being the risk of success is in general similar to the risk of failure, which can create a significant disparity between the valuation today and the realised valuation.<\/p>\n After understanding what can be deemed an intellectual asset, how they might be valued, and how they are represented in an enterprise balance sheet, it would seem that recognition of those assets by an organisation would follow a simple three-stage process to: identify the intellectual assets owned by the enterprise; appraise the value of those assets; and disclose to balance sheet.\u00a0 Whilst this may be true in part, the actual ability to follow this process is governed by accounting standards, legal statutory requirements and those requirements developed through case law.<\/p>\n There are generally three levels of standards that are developed relevant to accounting and valuation, these are regulatory standards, legal-guidance standards and self-regulatory standards.\u00a0 In Australia the regulatory standards are legislated by the AASB, which is a government agency under the Australian Securities and Investments Commission Act 2001 (Cth)<\/em>.[56]<\/a> The primary responsibility for the AASB under the Act is to formulate accounting standards under s334 of the Corporations Act 2001 (Cth)<\/em>.[57]<\/a> In the USA, and in a similar way to the AASB, the Financial Accounting Standards Board (\u2018FASB\u2019) develop accounting standards for the private sector, that are recognised as authoritative by the statutory body of the Securities and Investments Commission (\u2018SEC\u2019) who have that power invested in them by the Securities Exchange Act of 1934<\/em>.[58]<\/a> Other nations have similar systems.<\/p>\n Relevantly, the AASB are also assigned to work with other similar nations agencies to converge national standards with international standards so as to \u2018develop a single set of accounting standards for worldwide use\u2019.[59]<\/a> In line with the development of a common accounting standard, the AASB has been working to integrate the Australian regulations by making them equivalent to International Financial Reporting Standards (\u2018IFRS\u2019) that are issued by the International Accounting Standards Board (\u2018IASB\u2019).[60]<\/a> This integration has been a requirement since 1 January 2005, although the AASB still retains a number of local standards.<\/p>\n The IASB is an independent standard setting board that works with national agencies \u2018to develop a single set of high quality, understandable, enforceable at a local level, and globally accepted financial reporting standards based upon clearly articulated principles\u2019.[61]<\/a>\u00a0 There are close to 120 countries that are currently using the standards, including Australia, Canada, Brasil and the European Union countries.[62]<\/a>\u00a0 It is also suggested that the United States of America (\u2018US\u2019) and Japan will integrate the IFRS standards and decide on obligatory requirements for companies in the near future.[63]<\/a> However, in the US there is resistance to move away from the Generally Accepted Accounting Principles (\u2018GAAP\u2019) as these GAAP standards are precise and understood,[64]<\/a> even though foreign entities with operations in the US can file accounts with the SEC based on IFRS principles.<\/p>\n The guidance standards in Australia those are provided by the Australian Securities and Investments Corporation (\u2018ASIC\u2019) as a recommended procedure according to their interpretation of the law, which if followed should to prevent them exercising their legislative power. In other jurisdictions these types of standards may require a detailed understanding of how to interpret statutory provisions and case law.<\/p>\n Self-regulatory standards are those that are created by expert organisations such as the Accounting and Professional Standards Board (\u2018APESB\u2019), American Institute of Certified Public Accountants (\u2018AICPA\u2019) or the International Standards Organisation (\u2018ISO\u2019).\u00a0 In general the industry experts assist in creating a procedure that is based on best practice. These organisations are not part of government and do not make laws or regulations, however, it is not unusual for these standards to be adopted by government agencies or referenced in case law,[65]<\/a> and accordingly it is recommended in most instances that these types of standards are followed unless there is good reason not to.<\/p>\n Returning to the three-stage process, the starting point is the identification of intellectual assets.\u00a0 From strategy, an enterprise will seek to create and increase value through: acquisition or mergers for control of externally owned assets, which are either individual assets or a business combination of multiple assets; organic growth, or the development of internally generated assets; or from a combination of both. \u00a0This is where a major point of conjecture arises in the current standards for the valuation of intangible assets, as internally generated intangible assets are not accounted for in the same way as acquired intangible assets.<\/p>\n IFRS 3, created by the IASB in conjunction with FASB, and has its equivalent in SFAS 141,[66]<\/a> was created to set international regulatory standards for the acquisition of assets in business combinations where there is a controlling ownership takeover.\u00a0 In general this standard sets expectations for clear identity of the controlling entity, the date of the transaction, recognition and measurement of the acquired assets, and measurement and recognition of goodwill.\u00a0 In particular intangible assets must be recognised measured at their \u2018fair value\u2019 at acquisition date according to the \u2018acquisition method\u2019[67]<\/a> of accounting for business combinations.\u00a0 Further to this goodwill is recognised as the difference between the purchase price and the fair value of the recognised and measured assets and liabilities.[68]<\/a>\u00a0 Where this difference creates a positive value the amount is recognised as a goodwill asset in the balance sheet, and where this is a negative figure the amount is recognised in the revenue statement.[69]<\/a><\/p>\n In Australia, and according to AASB 138, which is directly derived from IAS 38 and will be treated here as the same standard,[70]<\/a> the first hurdles for an intangible asset to be recognised is that it meets an identification criteria, that being: it meets the definition of an intangible asset; is distinguishable from goodwill; arises from contractual rights, or is capable of being identified separably from the business entity so it could be \u2018sold, transferred, licensed, rented or exchanged\u2019.[71]<\/a> \u00a0Further to this the criteria for recognition of those intangible assets is that future economic benefits will arise due to that intangible asset, and the asset cost can be identified.[72]<\/a> However, this is where the requirements of the AASB 138 standard start to display an issue in regards to the potential for recognition by an enterprise, as an intangible asset is always considered to have met the recognition criteria when acquired, either as an individual asset or as part of a business combination, as per IFRS 3 and SFAS 141, but internally generated intangible assets are not so easily recognised.\u00a0 For example IAS 38 prevents the recognition of any internally generated \u2018brands, mastheads, publishing titles, customer lists\u2019 and similar items from being recognised as intangible assets.[73]<\/a>\u00a0 This is in stark contrast to that of similar assets that are acquired according to IFRS 3 or even by the IAS 38 standard.<\/p>\n In regards to internally generated intangible assets IAS 38 prevents any investment from research from being capitalised to the balance sheet,[74]<\/a> but assuming that an intangible asset can separately identify the research phase from the development stage then IAS 38 requires any spent funds during the development stage to be expensed unless they meet all of six recognition criteria.[75]<\/a> These recognition criteria require the enterprise to prove that the intangible asset is technically feasible, they intend to use it to derive value and that value will bring future economic benefit, and that they have adequate resources to complete the development.[76]<\/a>\u00a0 Assuming these six criteria are met the intangible asset can be recognised and capitalised to the balance sheet, together with future expenses.<\/p>\n The situation for US incorporated private firms is more difficult as ASC 350 requires directly attributable costs for internally generated intangible assets to be expensed, unless meeting specific exceptions such as for computer software for sale or use.[77]<\/a> \u00a0Both IAS 38 and ASC 350 seem to be divergent from the whole premise of what an intangible asset actually is, that it would require thought and research to create, which incurs costs.\u00a0 Currently this makes it difficult for enterprises to represent their potential for organic growth on the balance sheet.<\/p>\n Even when IAS 38 allows an internally generated intangible asset to be recognised on an enterprise balance sheet, a hypothetically identical intangible asset acquired would be at \u2018fair value\u2019[78]<\/a> whereas the internally generated would be at directly attributable accounting cost.[79]<\/a>\u00a0 This removes the objective comparability between the assets.<\/p>\n The question that must be proposed is that if one of the purposes of a unified accounting standard is to improve the underlying economics in the balance sheet, better reflect the investment and evaluation of such, and allow comparability between business entities,[80]<\/a> then how does the recognition of acquired intangible assets on the one hand and non recognition of internally generated intangible assets on the other aid comparability between enterprises? Perhaps the most obvious demonstration of the difference and discrepancy in recognition is in regards to goodwill.\u00a0 Goodwill is an asset according to SAFS 142, and even though it should be deemed an intangible asset according to the definition of an intangible asset, it is not classified as such by IAS 38 and cannot be recognised when it is internally generated.\u00a0 This is in contrast to the standard for acquired goodwill, as this can be recognised on the balance sheet as an asset according to IFRS 3 and SAFS 141. This would seem to remove objective comparability for users of financial information.<\/p>\n When intangible assets have been identified according to the regulatory standards criteria it means that they are recognised and can appear in the balance sheet. Before appearing on the enterprise balance sheet the intangible assets must first be measured by valuation.\u00a0 The standards for valuation generally fall into two parts, firstly the requirements for accounting purposes, and secondly the requirements for the preparation of the valuation.<\/p>\n IAS 38 has different requirements for accounting for intangible assets depending on the assets source. Internally generated intangible asset should be initially valued only based on the directly attributable costs that meet the recognition criteria.[81]<\/a>\u00a0 Separately acquired intangible assets must be valued at the actual transaction cost, including those directly attributable costs in having the asset ready for use.[82]<\/a>\u00a0 It should be noted that the transaction price for a separately acquired intangible assets might have been assisted by asset valuation prior to the transaction, although this is not an absolute requirement.\u00a0 In both of these cases it is reasonable to suggest that this is an easy measurement for an internal accountant to accurately make.<\/p>\n On the other hand IAS 38 is aligned with IFRS 3 and SFAS 141 that separable or grouped intangible assets, purchased as part of a business combination, will be the fair value<\/em> at acquisition date<\/em>.[83]<\/a> From 1st<\/sup> January 2005 the IFRS 13 standard became relevant, which is more aligned with SFAS 157 and ASC 805 in regards to the definition of an intangible asset, where \u2018Fair value is defined as the price that would be received to sell an asset or that would be paid to transfer a liability in an orderly transaction between market participants as of the measurement date\u2019.[84]<\/a><\/p>\n IFRS 13 is helpful in providing the principle framework with which to arrive at a fair value, through a hierarchy for disclosure.\u00a0 There are three levels to the hierarchy, which is based on the quality of the available data inputs for arriving at the sum, through cost, market or income methods.[85]<\/a> Level 1 is the best available inputs, i.e. an active market for the direct asset so as to derive market price.[86]<\/a> Level 2 is similar to that described earlier where comparable assets are used to arrive at a valuation.[87]<\/a> Level 3 is where inputs of an active market are not available, which allows the enterprise to use its best data in the circumstances to arrive at a valuation.[88]<\/a><\/p>\n Fair value at acquisition date requires an expert understanding of valuation principles and methodology and is therefore not such an easy calculation for an internal accountant to measure. Additionally an internal or stakeholder accountant could also be subject to significant bias in arriving at a valuation.[89]<\/a> Even though the standards note that these valuation can be completed by internal management, providing an orderly transaction suggests a preference for an independent valuation based on thorough methodology, or in short that a valuation expert whom is skilled in the art of intellectual asset valuation.<\/p>\n The art of preparing a valuation is open to personal bias of the valuation expert, as well as the valuation methods used in arriving at the estimated sum being capable of significant disparity.[90]<\/a>\u00a0 The IFRS and SFAS are based on principle rather than procedure, and there is limited guidance in the in regards to the methodology and inputs that should be used to arrive at the estimation of fair value, and nothing regarding the required details of a suitable valuation report. However, self-regulatory standards organisations such as ISO regarding brand valuation,[91]<\/a> and AICPA for business and intangible asset valuations,[92]<\/a> and APES for valuation reports,[93]<\/a> offer similar approaches to each other and guidance to the correct preparation, to begin to bridge the gap and enable a common approach for intangible assets.\u00a0 These standards are in line with the regulatory standards for valuation approaches, but additionally provide more detailed guidance on the expectation of what valuation inputs (observable and unobservable) should be considered when preparing a valuation, including both the analysis of financial and legal factors.\u00a0 Owing to the importance of the valuation estimation in the realisation of intangible assets on an enterprise balance sheet, it is worthwhile understanding the requirements of an independent valuation appraiser.<\/p>\n The genesis of a valuation report is the engagement of the appraiser by the engagement party, which must detail the scope, purpose, valuation date, standard of value, intended use including restrictions, and type of engagement.[94]<\/a> The appraiser must ensure that they have no conflict of interest and that there will be sufficient and quality information available for them to complete the valuation report.[95]<\/a> Assuming that there is sufficient information available, then the appraiser will be able to use their information analysis and valuation skill to arrive at a valuation sum for a valuation report.\u00a0 If there is not sufficient information, or if requested the appraiser may only provide a calculation report which is a more basic document, not necessarily relevant for intangible asset realisation on balance sheets.[96]<\/a><\/p>\n The valuation report document provided by the appraiser should include comprehensive details of the information and assumptions used in arriving at a valuation sum.[97]<\/a> The report should detail any relevant information that may affect the valuation: the type of engagement such as valuation, summary or calculation; sources of information; statements regarding the appraiser, such as independence<\/em> from engagement party and qualifications; analysis of interest, such as intended use, applicable standard of value, assumptions and considerations; non-financial<\/em> details such as management team, industry sector, facilities, and economic environment; financial<\/em> info such as method<\/em> of valuation<\/em>, discount rates<\/em>, financial statements and assumptions; ownership<\/em> information about the intangible asset, including legal rights; valuation adjustments; and most importantly a conclusion of value<\/em>.[98]<\/a><\/p>\n The self regulatory standards give some good guidance in relation to the data required for financial information, but still stop short of giving a standard procedure for calculations according to the cost, market or income approach, which leaves the valuation open to disparity based on the views and methods of the appraiser.<\/p>\n Highlighted in the above-mentioned regulatory and self-regulatory standards is the recommendation for management to use an independent appraiser, who is an expert in valuation. \u00a0In Australia the regulatory guide ASIC 112 provides guidance on its statutory legal interpretation of the Corporations Act 2001<\/em> (Cth.), and relevant case law interpretations upon the requirement for independence of an expert, where the key criteria are that the expert \u2018should be, and appear to be, independent\u2019,[99]<\/a> and \u2018give an opinion that is genuinely its own opinion\u2019,[100]<\/a> as well as guidance on interaction with interested parties and use of third parties.[101]<\/a> Brooking J noted the requirement and importance of the expert in Phosphate Co-operative v Shears (No 3)[102]<\/strong><\/a> <\/em><\/p>\n Unless high [independence] standards are observed by those who prepare these [expert] reports, there is a danger that the systems established for the protection of the investing public will, in fact, operate to their detriment\u2026 The experts integrity from baneful influences are essential.[103]<\/a><\/p>\n With similar authority, ASIC 111 provides more specific guidance regarding the content of independent expert reports, including: how transactions should be analysed, expert methodologies and assumptions, report requirements, and potential regulatory action. Notably, the standard requires an expert to be just that, as Gyles J noted in Reiffel v ACN 075 839 266 Ltd[104]<\/strong><\/a> <\/em>\u2018it is implicit\u2026 that such an expert will exercise care, skill and judgement appropriate to the relevant field of expertise in forming and expressing the opinion\u2019.[105]<\/a><\/p>\n Without doubt different jurisdictions will have variations on the Australian requirements and local laws should always be taken into consideration when preparing valuation reports.[106]<\/a>\u00a0 For example in the US some observers believe that the requirement for a skilled expert witness will be an increasing one in litigation in federal and across multiple state jurisdictions.[107]<\/a> This is derived for the decisions in two key cases.\u00a0 In Daubert v Merrell Dow Pharmaceuticals<\/em>, Inc.[108]<\/strong><\/a><\/em> the Court held that the Federal Rules of Evidence, Rule 702, overrode the previous Frye \u2018general acceptability\u2019 test for the acceptability of scientific evidence.\u00a0 Here the Court implemented a \u2018flexible test\u2019 for the reliability of \u2018scientific\u2019 evidence, thereby providing greater scope for the Court in deciding if evidence was valid.[109]<\/a>\u00a0 This flexible test has since 2011 been added to Rule 702.[110]<\/a>\u00a0 In Kumho Tire Co., Ltd. v Carmichael[111]<\/strong><\/a><\/em> the Court extended the reach of the acceptable evidence to include that which was non-scientific as long as it was \u2018technical\u2019 and \u2018specialised\u2019 knowledge.\u00a0 This so called \u2018Daubert Test\u2019 has subsequently also been adopted as precedent by the Canadian Supreme Court in R. v Mohan.[112<\/a>]<\/strong><\/em><\/p>\n This requirement of an independent expert may not seem to directly affect the ability to represent valued assets on a balance sheet, but may have indirect consequences if not followed, especially if relied upon for future transactional, compliance, litigation or tax purposes. \u00a0For example evidence of how the common law courts may deal with poor methodologies, even when experts evidence is provided, are seen in Caracci v Commissioner of Inland Revenue<\/em> (\u2018CIR\u2019).[113]<\/a> In this case the CIR had issued excise tax penalty notices to Caracci for incorrect valuation of assets during an ownership change.\u00a0 The Tax Court heard the original case and found in favour of the CIR, even though they dismissed the methodology of the CIR\u2019s expert witness, and came up with their own valuation of the asset at USD 5m supposedly based on the market value of invested capital.\u00a0 The Appeals Court reversed and rendered the Tax Courts decision re-affirming the definition of \u2018fair value\u2019 and noting inter alia<\/em> that the CIR\u2019s expert had made errors due to incorrect selection and application of valuation methodologies used to derive the initial excise notice.\u00a0 The Appeals Court also found that the Tax Court had made its own errors in selection and application of valuation methodologies.[114]<\/a><\/p>\n This case additionally demonstrates that unless there is an accepted valuation methodology that becomes a regulatory standard then consistency of application in the courts, especially in multiple jurisdictions, could be subject to variable decisions.<\/p>\n The adjustment of the balance sheet to correctly represent the identified and valued intangible assets is a relatively easy process for any qualified accountant.\u00a0 Other than those items that can be expensed and represented directly on the revenue statement,[115]<\/a> intangible assets are identified together with their values and added to the assets side of the ledger with either the corresponding reduction in cash reserves, or increase in the liabilities side of the ledger by debt or equity.\u00a0 Thereby maintaining the integrity of accounting theory and balance sheets.<\/p>\n IFRS 3 realises the difficulty of correctly understanding all values in the current accounting period especially if a business combination is acquired immediately prior to the end of an accounting period, and as such adjustments are possible within 12 months of the acquisition date if relevant to the acquisition date.[116]<\/a>\u00a0 After this period the assets acquired in a business combination are dealt with as a consolidated disclosure with other assets of the owning enterprise.[117]<\/a><\/p>\n The more detailed requirement for representation of intangible assets follows their recognition in regards to their carrying amount and the related measurement, useful life, and disclosure. \u00a0For measurement the enterprise has two choices for each asset or asset group, it can use a traditional physical asset style approach where the asset retains its initial cost less any amortisation or impairment, or alternatively the enterprise can use the revaluation model.[118]<\/a> The revaluation model allows a periodic update to the fair value of the intangible asset at the date of the revaluation, less and accumulated depreciation or impairment following that valuation.[119]<\/a> Due to the potential of tax modification there are some strict requirements on revaluations being clearly identified as a positive or negative surplus in equity, but sometimes in the revenue statement as a profit or loss where this eventually affects equity through retained earnings.[120]<\/a><\/p>\n The revaluation model perhaps intuitively suits the intangible asset, but as fair value is its primary requirement and the standards require an active market, the cost model is usually the required approach for brands, patents, trademarks and copyrights owing to their unique nature.[121]<\/a> In regards to fair value IFRS 13 directs that the initial disclosure of value calculation should be according to the level and type of inputs used to arrive at the valuation.[122]<\/a><\/p>\n The useful life of an intangible asset is either finite or infinite.[123]<\/a> The finite asset, for example patents or contracts, is depreciated over its useful life in a diminishing proportional or straight line approach,[124]<\/a> in much the same way that a piece of industrial equipment would be treated.\u00a0 This is an understanding that the asset value decreases over time due to obsolescence.\u00a0 However, some assets useful lives are described as infinite, such as a Trade Mark or Brand, where the value of the asset is not expected to diminish over time and they are expected to continue similar cash flows.\u00a0 These infinite assets can not be amortised, but must be annually tested for impairment, or if impairment is indicated, although their status can change to finite if this requirement becomes obvious.[125]<\/a> In both cases the intangible assets must be written off when no future economic benefits are expected to flow to the enterprise.[126]<\/a><\/p>\n Disclosure is all about being able to comprehensively explain how the enterprise has accounted for the carrying amounts of each of its intangible assets or classes of intangible assets.\u00a0 Amongst other things IAS 38 requires disclosure on the carrying amount, the measurement method, the useful life, related amortisation methods and impairments, indication of whether the intangibles were internally generated or purchased separately or as part of a business combination, fair value, and details regarding revaluation.[127]<\/a> In addition to this IAS 27 requires ongoing disclosure in relation to the ownership of intangible assets, where any change must be disclosed with profit or loss on those changes being represented in the revenue statement.[128]<\/a>\u00a0 IFRS 13 requires additional disclosure in regards to those assets based on fair value, especially where the calculation is based on level 3 inputs.\u00a0 This includes proof of sales, issues and settlements, and relevant profit and loss, and importantly a written sensitivity analysis on how the assumptions on the level 3 inputs may change. \u00a0Interestingly IAS 38 also encourages disclosure on intangible assets that are not recognised in their standard, which suggests a more detailed requirement for all investments.<\/p>\n It can be seen from an overview of the current standards that there is a more detailed system for the recognition of intangible assets by enterprises, that is: identify, recognise, measure\/value, <\/em>and disclose<\/em> intangible assets that are owned by the entity, acquired individually or as part of a business combination, or internally generated.<\/p>\n The harmonisation of accounting standards on either an international level, such as the IASB and FASB, or national level to the international standards, for example the AASB, or US GAAP with IFRS are based primarily on providing a better and consistent quality of enterprise financial information for comparability and investment decisions by stakeholders.\u00a0 Therefore, the question on intangible assets is a subset of a much larger accounting question.<\/p>\n In regards to accounting there are many detractors who would prefer that standards are not increased or imposed for the comparability between organisations for investment or other purposes. Some argue that active markets already exist for comparison of business enterprises, and this is in the financial markets that constantly price the overall valuation of enterprises according to their market cap. Others argue that this may give a market or fair value for the portfolio of business assets, but still does not give good visibility to individual assets and will, though not on the balance sheet, only appear as a hypothetical overall change in goodwill in comparison to equity.\u00a0 Although in agreement with the market cap principle, it is suggested that rather than have unclear valuations for individual intangible assets, if value is to be recognised on the balance sheet then a default to goodwill is the best answer.[129]<\/a>\u00a0 However, even the default to goodwill can lead to problems of correct value representation, as it is not subject to the same amortisations as intangible assets, thereby benefitting executives who wish to show the market improved earnings ratio\u2019s.[130]<\/a>\u00a0 Others argue that speculative items such as intangible assets should not appear on the balance sheet at all.[131]<\/a> This is because intangibles can loose value very quickly, especially where innovations replace intangible technology assets, or new competitors enter the market, suggesting that including their value on balance sheets leads to overvaluation, with the best solution being the disclosure of the intangible asset but not recording of its value.[132]<\/a>\u00a0 Some commentators also argue, the methods required to maintain so-called fair value introduces \u2018unwanted subjectivity, distorts reported earnings, and greatly increases earnings volatility\u2019.[133]<\/a><\/p>\n With these fundamental arguments against standards, an important reason for enterprises to recognise intangible assets returns to business strategy.\u00a0 It is said that most enterprises currently have very poor processes in place for measuring and managing their intangible assets.[134]<\/a> However, when properly managed intangible assets can lead to competitive advantage, improve market position, increase revenue, and when using this information and communicating it to stakeholders can increase their overall enterprise valuation.[135]<\/a> In this way harmonising standards can also assist enterprises in creating structures and methods to improve their management and therefore realisation and valuation of intangible assets.\u00a0 In relation to multinational organisations, or those business enterprises with a potential to expand outside their national accounting standards jurisdictions, the implications of harmonisations of standards should bring the economic benefits of a single accounting system.<\/p>\n The general position on whether the harmonisation of the standards to IFRS is providing the stated benefits is that empirical evidence suggests that they are, particularly in regards to higher quality accounting information standards and comparability between statements.[136]<\/a>\u00a0 The evidence also suggests that where enterprises had already adopted IFRS standards balance of information between interested parties was improved as enterprise private information was made available to analysts, reducing sinister practices such as insider trading and thus enabling comparability.[137]<\/a> Furthermore, studies show in particular that where the IFRS are obligatory and enforced<\/em> in local jurisdictions barriers to international investment are reduced,[138]<\/a> and costs of preparation of financial statements is reduced, thereby returning economic benefits.\u00a0 Certainly from this perspective the harmonisation of standards provides enterprises for greater scope and reason to realise and value intangible assets.<\/p>\n In regard to the recognition of intangible assets it seems that the fundamental issue is not that of meeting the stated goals of the benefits of overall harmonisation, but in the unequal recognition of internally generated intangible assets with those that are acquired.\u00a0 This statement seems at odds with empirical evidence of information quality and comparability, but is simply expecting a higher standard for financial information. The trend that standards organisations such as IASB, FASB, and national accounting standards boards that have harmonised these international standards is, inter alia<\/em>, to rectify this intangible asset inequality issue.<\/p>\n The office of the AASB on behalf of the IASB and supported by the FASB generated a discussion paper regarding the initial accounting for intangible assets.[139]<\/a> This paper focussed on the factors relating to identification, recognition, measurement, and disclosure for internally generated intangible assets setting forward a recognition or direction for each.<\/p>\n From identification viewpoint the position is simple: fundamentally there is no difference in the underlying nature of an intangible asset that is organically internally generated, or is alternatively acquired.[140]<\/a> The recommendation being internally generated intangible assets should be recognisable in the same way as they are when purchased as part of a business combination according to IFRS 3 framework.[141]<\/a><\/p>\n Consistent with the IFRS 3 framework, recognition of intangible assets could be confirmed if planned investment can be linked with costs to create the asset, if future cash flows are probable.[142]<\/a>\u00a0 This would include those intangible items not currently recognised in IAS 38, where intangibles would be measured and recognised on the balance sheet at fair value.[143]<\/a> There is consideration in regards to the principles behind valuation, and it is suggested that there is considerable work to do in regards to standards in this discipline.[144]<\/a> Some concerns in this area relate to costs of using an external appraiser, and the methodologies used to assess cash flows can be inconsistent especially where valuation is a developing skill,[145]<\/a> and it is being suggested to standard setters that a bucket list of what should be considered as insignificant for valuation is clarified.[146]<\/a> Furthermore the issue seen in cases such as Caracci,[147]<\/strong><\/a><\/em> where the Tax Court developed its own version of a valuation and was subsequently overruled by the appellant Court, disregarding expert appraisers valuations, would be minimised where the valuation items and methods are specified in regulatory standards. In courts that have accepted the \u2018Daubert Test\u2019, where peer review from the self-regulatory standards would be possible, may not have the same requirement as those that have not adopted the test.\u00a0 This is a philosophical question between whether to follow the IFRS method of principles of valuing intangible assets, i.e. market or income method based on the quality of inputs, or implementing explicit rules such as those commonly seen in US GAAP.[148]<\/a><\/p>\n The recommendations are that once recognised the carrying amount of internally generated intangible assets would be treated identically to acquired intangible assets in that continuing impairment, amortisation, and disclosure would follow the IFRS 3, IAS 38, IFRS 13 and IAS 27 framework.[149]<\/a> For those intangible assets that do not meet the identification, recognition and measurement criterion, the recommendation is that these are still required to be identified in disclosure.[150]<\/a>\u00a0 This is already an opt-in on standards such as IAS 38,[151]<\/a> as they can still have saleable value.\u00a0 This provides scope to include greater details on all investments, so that stakeholders can make decisions that are based on non-financial information as well as financial information.<\/p>\n The trend is to create a single worldwide accounting standard through the convergence of varying international standards, and adoption of international standards by nations that are enforced locally.\u00a0 Through the improvement of the international standards, to enable the recognition of internally generated intangible assets as per acquired intangible assets, together with improvements in the identification of relevant intangible assets, improved methodologies and standards for valuation appraisal, and fair value continual disclosure of intangible assets, together with economic benefits, will give enterprises improved scope to recognise and value their intangible assets.<\/p>\n Business strategy sees key executives of enterprises developing business plans that invest funds to create assets that will return future profits and cash flows.\u00a0 These business plans are either to grow organically or through acquisition of third party assets. The organisational view of a business enterprise means that these investments are human, social, and organisational assets, many of which are intangible assets.<\/p>\n Accountancy is the measurement scorecard for business enterprises, and ultimately the financial statements should accurately represent the value of the enterprise.\u00a0 However, as was seen many intangible assets are not adequately represented by enterprise balance sheets.<\/p>\n Regulatory standards in different jurisdictions assist the preparer of financial statements to identify, recognise, value and disclose intangible assets. \u00a0Essential to this process is the valuation of those intangibles, which can be measured using cost, market, or income methodologies to arrive at a fair value.\u00a0 Self-regulatory standards are in place to assist appraisers to expertly value the intangible assets of an enterprise, which expect both financial and legal aspects to be taken into consideration.\u00a0 It is recommended that for the purposes of an enterprise mitigating the risk of future legal and related issues, that using an independent expert in the preparation of valuations is pertinent.<\/p>\n The harmonisation of international standards is intended to improve the quality of financial information for stakeholders, and improve comparability between distinctive enterprises.\u00a0 There is evidence to suggest that overall this is occurring, in particular returning economic benefits to adopting nations.<\/p>\n However, the current issue with the standards is that there is a disparity between the representations of acquired intangible assets on balance sheets and internally generated intangible assets that are more likely to be represented off balance sheet.\u00a0 Upgrading the standards to remove this disparity in representation between internally generated and acquired intangible assets so that they can be accounted for with a similar framework, in addition to the continuing harmonisation of international standards, should improve the ability of enterprises to recognise and value their intangible assets.\u00a0 This will return greater future profits and cash flows for the enterprise thus completing the business strategy benefit.<\/p>\n <\/p>\n A Articles \/ Books \/ Reports<\/strong><\/p>\n Allen, Abigail M. and Ramana, Karthik, ‘Towards an Understanding of the Role of Standard Setters in Standard Setting’ (2012) (Forthcoming; Harvard Business School Accounting & Management Unit Working Paper No. 10-105) (May 24) Journal of Accounting and Economics (JAE)<\/em><\/p>\n Birgitte Andersen, Ludmila Striukova, Intangible Asset and Intellectual Capital: Where Value Resides in the Modern Enterprise <\/em>(2004)<\/p>\n Billiot, Mary J. and Sid Glandon, ‘The Impact of Undisclosed Intangible Assets on Firm Value’ (2005) Vol. 13(No. 2) (June 2005) Journal of Accounting and Finance Research<\/em> 67<\/p>\n Bogoslaw, David, ‘Global Accounting Standards? Not So Fast’ (2008), Bloomberg Businessweek<\/em>\u00a0 <http:\/\/www.businessweek.com\/stories\/2008-11-13\/global-accounting-standards-not-so-fastbusinessweek-business-news-stock-market-and-financial-advice><\/p>\n Boos, Monica, International Transfer Pricing: The Valuation of Intangible Assets<\/em> (Kluwer Law International, 2003)<\/p>\n Brand-Finance, ‘Australian Intangible Asset Review’ (2008)<\/p>\n Caty, ISO 10668 and Brand Valuations: A summary for Appraisers, April 2001<\/p>\n Cezair, Joan A., ‘Intellectual Capital, Hiding in Plain View’ (2008) 21(2) Journal of Performance Management<\/em> 29<\/p>\n Chistopher Buccafusco, Christopher J. Sprigman, ‘The Creativity Effect’ (2011) 78(1) University of Chicago Law Review<\/em> 31<\/p>\n Chris Rose, John Cronin, Rachel Schwartz, ‘Communicating the Value of Your Intellectual Property to Wall Street’ (2007) 50(2) Research Technology Management<\/em> 36<\/p>\n Christopher Heuer, Richard Romero, ‘Prescription for Valuing Intangible Assets in Health Care’ (2007)\u00a0 (September \/ October) Value Examiner<\/em> 7<\/p>\n Churchwell, Synthia, ‘Financial Reporting Goes Global’ (2006)\u00a0 Harvard Business School Working Knowledge<\/em> 1 <http:\/\/www.hbswk.hbs.edu\/cgi-bin\/print\/5177.html><\/p>\n Dan Lovallo, Patrick Viguerie, Robert Uhlaner & John Horn, ‘Deals without Delusions’ (2007) 85(12) (December) Harvard Business Review<\/em> 92<\/p>\n David Goldheim, Gene Slowinski, Joseph Daniele, Edward Hummel, Joghn Tao, ‘Extracting Value from Intellectual Assets’ (2005) 48(2) (March-April) Research Technology Management<\/em> 41<\/p>\n Deloitte, A Roadmap to Accounting for Business Combinations and Related Topics<\/em> (Accounting Standards and Communications Group of Deloitte & Touche LLP, 2009)<\/p>\n Francois Brochet, Alan Jagolinzer, Edward J. Riedl, ‘Mandatory Ifrs Adoption and Financial Statement Comparability’ (2011) (11-09) (April) Harvard Business School Accounting & Management Unit Working Paper<\/em> 1<\/p>\n Billiot, Mary J. and Sid Glandon, ‘The Impact of Undisclosed Intangible Assets on Firm Value’ (2005) Vol. 13(No. 2) (June 2005) Journal of Accounting and Finance Research<\/em> 67<\/p>\n Heberden, Tim, ‘When Will an IP Valuation Be Helpful in Informing Legal Decisions?’ (2008)\u00a0\u00a0 <http:\/\/www.brandfinance.com\/Uploads\/pdfs\/IP%20Valuation%20for%20Legal%20Decisionsv2.pdf><\/p>\n Higgins, Robert C., Analysis for Financial Management<\/em> (McGraw-Hill, 10th ed, 2012)<\/p>\n Hunter, Dan, The Oxford Introductions to US Law: Intellectual Property<\/em> (Oxford University Press, 2012)<\/p>\n John Tao, Joseph Daniele, Edward Hummel, David Goldheim, Gene Slowinski, ‘Developing an Effective Strategy for Managing Intellectual Assets’ (2005) 48(1) Research Technology Management<\/em> 50<\/p>\n Jonathan E. Kemmerer, Jiaquing Lu, Profitability and Royalty Rates Accross Industries: Some Preliminary Evidence<\/em> (2008)<\/p>\n Joshi, Dhruv, ‘Intellectual Property Valuation Using Income Approach Method for Technology Licensing’ (2011) 3(6) (Dec) Information Management and Business Review<\/em> 302<\/p>\n Keys, Robert, ‘Initial Accounting for Intangible Assets Acquired in Business Combinations: Research Results’, <\/em>(Australian Accounting Standards Board, 2012)<\/p>\n Leung, Peter, ‘Are Regulations Needed to Increase Market Transparency?’ (2012) Managing Intellectual Property<\/em>\u00a0 <http:\/\/www.managingip.com.ezp.lib.unimelb.edu.au\/Article\/3118210\/Search\/Are-regulations-needed-to-increase-IP-market-transparency.html?Home=true&Keywords=valuation&Brand=Site&tabSelected=True><\/p>\n Maddox, Jeff, ‘A Capital Markets Approach to IP Valuation’ (2011)\u00a0\u00a0 <http:\/\/www.cpaglobal.com\/download_centre\/white_papers\/ip_valuation><\/p>\n Mark Halligan, Richard Weyand, ‘The Economic Valuation of Trade Secret Assets’ (2006) 9(8) (February) Journal of Internet Law<\/em> 19<\/p>\n Martin Pergler, Eric Lamarre, ‘Upgrading Your Risk Assessment for Uncertain Times’ (2009) (No. 9) (January) McKinsey Working Papers on Risk 1<\/em><\/p>\n Michael J. Mard, Steven Hyden, James S. Rigby, Intellectual Property Valuation<\/em> (April 20 2000)\u00a0 <http:\/\/www.weknowvalue.com\/documents\/IP\/valuing_ip.pdf><\/p>\n Moss, David A., Introduction<\/h1>\n
Background<\/h1>\n
What are Intangible Assets?<\/h1>\n
Valuation methods<\/h1>\n
Standards Overview<\/h1>\n
Standards and Identification of Intangible Assets<\/h1>\n
Standards and Appraising Value of Intangible Assets<\/h1>\n
Standards and Disclosure to Balance Sheet<\/h1>\n
Points on International Harmonisation<\/h1>\n
Conclusion<\/h1>\n
Bibliography<\/h1>\n