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EFRAG research project on better information on intangibles



The project aims to develop alternatives to provide more relevant information on intangible in financial reporting. 

The aim of the project is not to change accounting requirements with the view to align reported equity carrying amount with the market value of the company. Rather, the aim is to:

  • Address a number of aspects in relation to internally-generated intangibles, including a categorisation and description of the different types of assets (marketing, technological, social, reputational or human capital) and how their different features are relevant in terms of financial reporting.
  • Investigate how to consider uncertainties that exist both in relation to the entity's ability to access future benefits and their amount and timing. This includes, for example, considering the ability of competitors to duplicate the entity's resource,  barriers for usage and spillovers.
  • Develop metrics to express earning potential and value: Measurement or disclosures.

Project history

Based on the feedback EFRAG received in response to its 2018 research agenda consult​ation, EFRAG decided to add a project on better information on intangible assets to its research agenda. 

 To address the aim described above and analyse the user's information needs, the research project will be approached in four phases.

  1. Problem Description: performing activities which will result in gathering information in order to formally define and describe the problem.
  2. Literature Review: performing a qualitative analysis based on relevant academic papers with a selected academic team from the University of Ferrara that is expected to be finalised by Q3 2019;
  3. Key Information Solution: researching for possible solutions to the defined problems, what may include:
    1. categorising and describing the different types of assets and how their different features are relevant in terms of financial reporting. The categorisation may be based on the nature of the intangible (marketing, technological, social, reputational, or human capital), the industry or some other criterion; and
    2. developing key indicators to express earnings potential and value. These may not fit as a measurement basis but could be used to disclose information in the notes.
  4. Testing: testing the identified solutions on different companies, including, if possible, the tests with the European Corporate Reporting Lab.

Tentatively, the EFRAG Secretariat estimates that Problem Description phase should be finalised by the end of 2019, what would include drafting a discussion paper. The literature review is expected to be finalised by Q3 2019. Key Information Solution phase will take approximately 12 months and testing phase will take approximately 9 months.

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