The average growth rate of intangibles from 2011 to 2021 was 8%. Credit: Gumbariya/Shutterstock.

The International Accounting Standards Board (IASB) and the UK Endorsement Board (UKEB) have discussed ways to identify intangible assets in financial statements.  

This discussion took place at a recent Institute of Chartered Accountants in England and Wales (ICAEW) event.  

It is part of the IASB’s review of International Accounting Standard (IAS) 38: Intangible Assets.  

The project, known as the ‘intangibles project,’ is currently defining its terms and is set to gain momentum next year. 

IAS 38, established more than 26 years ago, is considered outdated in today’s context where intangible assets play a crucial role.  

IASB member Nick Anderson explained that the intangibles project emerged from feedback on the Board’s 2022 Third Agenda Consultation.  

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Respondents to the consultation stated intangibles as the high priority for the IASB’s research project pipeline. Therefore, there was a need for better information about recognised and unrecognised intangible assets.  

They also called for modernising IAS 38 to accommodate new intangible asset types. 

Initial research from national standard-setters revealed stakeholder concerns including insufficient data on unrecognised, internally generated assets. 

UKEB data reveals that although intangibles represent 3% of items on UK balance sheets, their carrying value in 2021 was £351bn.  

The average growth rate of intangibles from 2011 to 2021 was 8%, surpassing inflation and total asset growth. 

In 2021, 79% of UK companies reported at least one intangible asset, with the largest 25% holding 97% of the total value of recognised intangibles.  

These values are said to primarily stem from acquisitions, indicating intangibles as key drivers of mergers and acquisitions activity.  

Some stakeholders argue for better representation of intangible value in financial statements. 

ICAEW Corporate Reporting Strategy head Sally Baker suggested that this area of reporting has been a long-standing challenge. 

Referring to ICAEW’s 2017 paper, What’s Next for Corporate Reporting, Baker noted that stakeholders have described intangibles as the ‘Achilles’ heel’ of reporting.  

The UKEB had already initiated its research on accounting for intangibles, publishing a qualitative report in March 2023 and a survey in May 2023. 

UKEB chair Pauline Wallace highlighted key findings from these reports.  

According to the findings, users consider both qualitative and quantitative information essential for materiality judgements on intangibles.  

They prefer relevant data to be included in the notes or the financial statements themselves, ensuring proper auditing.  

Wallace noted that the UKEB’s economic analysis suggested a significant recognition gap between recognised and estimated unrecognised intangibles. 

Pauline Wallace said: “That doesn’t mean that we think those intangibles should be on the balance sheet.  

“But I think it is interesting to understand what is underpinning some of the expenditure that companies are incurring.”