The Importance of Intangible Assets

4499 WordsMar 11, 200818 Pages
The Importance of Intangible Assets Evaluation of Transitional Issues from a Canadian Standpoint Contents Topic Page 1. Executive Summary 3 2. Report I. The Trade-off Between Relevance and Reliability 4 II. "Nothings" are Something to Consider 5 III. Current Practice in Canada 5 IV. The Challenge of Valuation 6 V. Analysis of Potential Improvements to Canadian Standards 7 • Issue One - Valuation  Valuation and Business Combinations  Solution to Valuation Issues • Issue Two - Improved Transparency  Recommendation for Improved Transparency VI. Comparison of Canada, USA, and International Standards 9  Goodwill…show more content…
In addition these assets provide an insight into an entity's future prospects. However, current Canadian and US accounting practice limits recognition of self developed intangibles in order to enhance reliability in financial reporting. Fundamentally, the nature of these limitations prevents management bias and inhibits unjustifiable flexibility of statement presentation. Current Practice in Canada In a more recent (June 2007) Re-Exposure Draft, the AcSB states its opinion toward the above-mentioned rules-based conditions implemented in the U.S.: "U.S. standards generally are interpreted (by the AcSB) as significantly limiting the recognition of any internally generated intangible assets….and contains an outright prohibition on the recognition of start-up and pre-operating costs"(AcSB, 2007). By employing information perspective in accounting for internally generated assets creates recognition lag and reduces reliability of financial data, due to the fact that unrealized increases in value of an enterprise through their use and development are not recognized on Balance Sheet. Users, in turn when evaluating qualitative characteristics of financial data recognize the recognition lag, and inability of projecting future prospects creates a great demand for more reliability. In Canada, however, AcSB's practice regarding intangible assets and recognition of internally developed intangible assets has been identified as a
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