IFRS Adoption
IFRS defines ‘intangible asset’ as ‘a non monetary asset without physical substance’ under IAS 38:8 (the Standard under IFRS 3 – Business Combinations which deals with accounting for intangible assets). The Standard indicates how to measure intangible assets and requires certain disclosures (Ekberg, M and Linus, L 2007). Examples given in the Standard are; computer software, patents, copyrights, motion picture films, customer lists, mortgage servicing rights, licenses, import quotas, franchises, customer and supplier relationships, and marketing rights. The root issue with intangibles is the simple fact that they are intangibles, and thus are difficult to categorise and appraise. The intangibles rules changes include: Treatment of unidentifiable intangibles (goodwill), which, pre-IFRS, Australian accounting standards required firms to amortise through earnings. This amortisation, calculated on a straight-line basis, could not exceed twenty years. Under IFRS 3 Business Combinations firms are instead required to recognise goodwill as an asset, and test for impairment at least annually. Treatment of identifiable IAs - including licenses, trademarks, patents, brand names and research and development (R&D). For example, AASB 1011 Accounting for Research and Development Costs stated that R&D would be charged to earnings when incurred, similar to the IFRS treatment. However, firms were able to capitalise these costs if they were expected beyond any reasonable doubt to be recoverable, then amortise them over future financial years to match them with related benefits (Godfrey et al, 2006).