Comments from ACCA to the Financial Reporting Council (FRC), May 2009.
ACCA is pleased to have this opportunity to comment on the above discussion paper (DP) which was considered by ACCA's Financial Reporting Committee.
The DP's starting premise is that the manner by which an intangible item comes into existence is not relevant to the determination of whether an item can be identified as an asset.
We have considerable sympathy for this view and the problems which may be raised by the inconsistency of the current models in requiring recognition of intangible assets when purchased or when they are the development costs of new products or services, but not when otherwise internally generated. We also accept the conceptual advantages of the valuation model set out in the DP as opposed to the cost model.
There are significant issues however with the proposals which in our view make it difficult to progress them.
The DP spent inadequate attention to these fundamental issues which are needed to justify the changes proposed in the first place.
Also the DP's proposals are substantially based on the recognition and measurement of intangible assets (separately from goodwill) in IFRS3. In our view there needs to be more evidence gathered and assessment of how well IFRS3 has been working and in particular on the increased recognition of separate intangible assets. This work may help to justify the model proposed for internally generated intangibles and allay concerns over the reliability of the valuations used.
We noted the suggestion explored in paragraphs 252 and 253 of starting with a disclosure-only system for reporting internally generated intangible assets. That seems a sensible suggestion, though we would support such information provided outside the financial statements in the management commentary section or equivalent.
Last updated: 12 Apr 2012