The response of Australian firms to AASB 138 disallowing the recognition of internally generated identifiable intangibles

Shawn Ho, Baljit K. Sidhu and Fan Yang

Accounting and Finance, 2023, vol. 63, issue 3, 3609-3641

Abstract: This paper responds to a call by the Australian Accounting Standards Board to investigate how Australian firms responded to a perceived loss of information pursuant to AASB 138 (IAS38) which mandated the de‐recognition of previously recognised internally generated identifiable intangibles, from its effective date of 1 January 2005. We find that the sample firms did not choose to provide alternative or substitute disclosure elsewhere in their annual report or financial statements anytime during our sample period (2005–2010). Prima facie, this is surprising given prior evidence from the value relevance literature that disclosures relevant to the value of internally generated intangibles are correlated with firm value and presumably informative for investors. However, we caution against the drawing of simple conclusions that this finding implies alternative disclosure may not be valuable. Rather, it is important to understand the forces or frictions that contribute to this result. Schipper (The Accounting Review, 82, 2007, 301) and Skinner (Accounting and Business Research, 38, 2008, 191) offer valuable insights into the potential issues such as the costs of alternative disclosure including proprietary costs of disclosing competitive information and, the lower credibility of financial disclosures outside of audited financial statements. These are important considerations in the on‐going standard‐setting debate on recognition versus disclosure of value relevant information on intangible assets.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/acfi.13052

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:acctfi:v:63:y:2023:i:3:p:3609-3641

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391

Access Statistics for this article

Accounting and Finance is currently edited by Robert Faff

More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().