Social costs and intangibles

Mario Abela

Chapter 9 in Handbook on Intangibles, 2026, pp 173-183 from Edward Elgar Publishing

Abstract: The corporate reporting literature is replete with the ascendency of intangibles as the fount of value in the modern corporation (e.g. IIRC, 2021). Various analysts have cited that up to 90% of the enterprise value of a company is comprised of intangibles (e.g. Ocean Tomo, 2022) that are not typically recognised and measured on the balance sheet unless they arise from a transaction with an external party such as a business acquisition (IFRS 3, IAS 38). The issue is not the nature of these assets, as all assets are bundles of future economic benefits and therefore ‘intangible’ what is unique about this class of assets is their relevance for financial reporting purposes hinges on the probability of those benefits being realised and measured (IASB, 2018). Where intangibles are recognised in the balance sheet it remains unclear how the change in the value of those intangibles is set against income through amortisation or impairment charges. Related to this but receiving very little attention in the literature is how to account for social costs in determining the performance of the corporation. Looking at intangibles through the lens of double materiality (EC, 2022) how should impact on society be treated in the accounting system. Coase (1960) and Friedman (1970) and other neoliberal economists have posited that social costs are a necessary evil of capitalism, and it is not the role of the firm to resolve such externalities and other impacts. However, policy makers in Europe have largely challenged the power of that doctrine in calling for purpose led corporations. It follows, that the modernisation of accounting needs to adapt to reconstructing the complete performance of a business model beyond the value that accrues to owners (Chang, 2022).

Keywords: Intangible assets; Corporate reporting; Financial reporting; Enterprise value; Double materiality; Social costs; Neoliberal economics; Purpose-led corporations; IASB standards; Non-financial performance; Accounting modernisation; ESG integration (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035306367
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