Conclusions Journal Modern Accounting & Auditing 2010-5.
The IASIFRS application on the intangible assets of non-listed companies
18
sign of the attention of the regulator. There is also an IASB project that aims to analyze the current requirements in IAS 38 with significant
limitations in recognizing intangible assets and their subsequent remeasurement. In fact, IAS 38 does not allow the recognition of assets arising from research as well as those internally generated. In addition, only minimal
requirements for the disclosure on intangibles that could compensate the limitations in recognizing and measuring them are specified.
“The measurementremeasurement and recognition andor disclosure of intangible assets in accordance with the principles in the Framework would arguably improve the relevance and reliability of information in general
purpose financial reports. Furthermore, the removal of the current difference in the treatment of intangible assets acquired in a business combination and internally generated intangible assets and between internally generated
tangible and intangible assets would lead to consistent accounting for circumstances that are economically very similar.” IASB
In accordance with this IASB project, Australian Accounting Standards Board 2008 has published a discussion paper that represents a proposal in recognizing internally generated intangible assets. In particular, it
takes into consideration a cost-based model and a valuation-based model. The former considers only planned internally generated intangibles. The latter uses a technique based on a hypothetical business combination and
accordingly, all internally generated intangible assets that would be recognised if acquired in a business combination under IFRS 3 should be recognised.
The board highlights that if an internally generated intangible asset does not meet the relevant recognition criteria, in the interest of providing useful information to users, entities should be required to disclose a
description of the asset and the reason why it fails to meet the relevant recognition criteria. This confirms that an improvement in financial reporting could be a wide and standardised disclosure
template Lev, 2008 capable of offsetting the “loss of information” due to the adoption of IAS 38, that requires firms to write-off many types of intangible assets. In the notes, in fact, information on investment cost and its fair
value could allow the safeguarding of the prudence principle from an accounting point of view and the true and fair view of the intangible contribution to the future profitability and cash flow generating capacity.
The evidence of the authors’ study is a contribution to the empirical literature based on the broad consensus that the treatment of intangibles in current accounting systems is not appropriate Cañibano, 2000 and presents an
inter-country disharmony Stolowy Jeny-Cazavan, 2001. Even if accounting research has not an immediate impact on accounting practice, the authors’ analysis is a
further confirmation that a revision process on behalf of the standard setter is necessary Lev, 1997. Intangibles, in fact, are one of the determinants of the financial performance of firms and, therefore, they should be reported in
the financial statement. In the meanwhile, a wider disclosure about intangibles could be the first step towards a recognition-based
approach.
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Edited by Linda and Mary
May 2010, Vol.6, No.5 Serial No.60 Journal of Modern Accounting and Auditing, ISSN 1548-6583, USA
22
The impact of European firms’ economic conditions and financial performance on accounting quality
Cláudia P. Lopes
1
, António M. Cerqueira
2
, Elísio Brandão
3
1. Accounting School, Institute Polytechnic of Porto, S. Mamede de Infesta 4465-004, Portugal; 2, 3. Faculty
of Economics, University of Porto, Porto 4200-464, Portugal
Abstract: In this study the authors analyse the possible effect of firms’ economic conditions and financial
performance on accounting quality. Bradshaw, et al. 2004, Gelos WEI 2005 stated that financial reporting quality is fundamental for investors and it affects international capital movements. Following Schipper Vicent
2003, the authors estimated accounting quality by abnormal accruals and earnings persistence. The authors’ contribution consists of investigating a huge number of firms from 17 European countries using unbalanced panel
data. The authors found evidence that economic conditions affect accounting quality: big firms and those with high current earnings exhibit better financial information. These results are robust because they do not depend on
the accounting quality proxy, even when the authors estimated regression with economical and financial factors alone or together. Financial performance does not seem to affect accounting quality. However, this relation is not
linear because in high leveraged firms, the capital structure becomes determinant.
Key words: accounting quality; abnormal accruals; firms’ economic performance; capital structure