European Financial and Accounting Journal 2013, 8(3):10-23 | DOI: 10.18267/j.efaj.104

Influence of Internally Generated Intangible Assets on Financial Statements Prepared in Accordance with IFRS

Libor Vašek1, Marek Filinger2
1 Ing. Libor Vašek, Ph.D. - Associate Professorr; Department of Financial Accounting and Auditing, Faculty of Finance and Accounting, University of Economics, Prague, W. Churchill Sq. 4, 130 67 Prague 3, Czech Republic; .
2 Mgr. Ing. Marek Filinger, Ph.D. - Associate Professor; Department of Economics and Management, Unicorn College, Prague, V Kapslovně 2767/2, 130 00 Prague 3, Czech Republic; .

This article looks at the very intricate and highly contentious issue of internally generated intangible assets as presented in the financial statements prepared under IFRS, with a special focus on research and development. In the first section, intangible assets are defined and then further classified as either purchased or internally generated; crucial distinction when choosing the right approach. The second section deals with research and development in a greater detail and provides not only a number of answers, but also raises several key questions, e.g. the question of objectivity and possible earnings management. Third section is devoted to measurement issues and in the last section, the reader finds excerpts from financial statements of different companies from various industries which illustrate the fact that some useful information is clearly missing. The conclusion suggest an easy, yet very efficien solution in tune with the ongoing convergence process between IFRS and U.S. GAAP, namely to move IAS 38 in the direction of U.S. GAAP and to forbid any capitalisation of development costs.

Keywords: Development, Financial reporting, IFRS, Research
JEL classification: M41

Published: October 1, 2013  Show citation

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Vašek, L., & Filinger, M. (2013). Influence of Internally Generated Intangible Assets on Financial Statements Prepared in Accordance with IFRS. European Financial and Accounting Journal, 8(3), 10-23. doi: 10.18267/j.efaj.104
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