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Accounting and Business Research
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Introduction
Robert Hodgkinson
a
a
Execut ive Direct or, Technical, The Inst it ut e of Chart ered Account ant s, England, Wales
Published online: 04 Jan 2011.
To cite this article: Robert Hodgkinson (2008) Int roduct ion, Account ing and Business Research, 38: 3, 169-170, DOI:
10. 1080/ 00014788. 2008. 9663330
To link to this article: ht t p: / / dx. doi. org/ 10. 1080/ 00014788. 2008. 9663330
PLEASE SCROLL DOWN FOR ARTI CLE
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are not t he views of or endorsed by Taylor & Francis. The accuracy of t he Cont ent should not be relied upon and
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or howsoever caused arising direct ly or indirect ly in connect ion wit h, in relat ion t o or arising out of t he use of
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Accounting and Business Research, Vol. 38. No. 3 2008 International Accounting Policy Forum. pp. 169-170
169
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 20:43 29 September 2013
Introduction
The five papers in this issue of International
Accounting Policy Forum address different aspects
of the question of intangibles – a highly controversial subject in recent decades.
The points on which there is no dispute are that
intangibles are extremely important, that nevertheless most intangibles do not appear in the balance
sheet and that, with some exceptions, the minority
of intangibles that do appear there are not reported
at their current values. From this common startingpoint people move on to arrive at widely differing
conclusions.
In New Reporting Models for Business (2003),
one of the first reports published by the Institute of
Chartered Accountants in England and Wales
(ICAEW) in its Information for Better Markets
campaign, we looked at some of the most prominent
calls for major reform in business reporting. We
noted that those who called for reform typically:
• asserted that there had been a tremendous
growth in the importance of intangibles and that
they were now the key drivers of business success;
• argued that intangibles’ absence from the balance sheet was a fundamental weakness in financial reporting, which meant that investors
were being seriously misled; and
• concluded that the answer lay in the provision by
businesses of more non-financial, qualitative,
and forward-looking information (although
there were also some calls for reform to financial
reporting).
Hence – and for other reasons that had nothing
to do with intangibles – the calls for a new business reporting model that would tell businesses
what they should disclose.
There seemed to us to be a number of questions
that deserved investigation. And so we commissioned the five papers that now appear here and
which were first presented at the Information for
Better Markets Conference held at the ICAEW in
December 2007.
Without wishing to attempt a summary of the papers, there are one or two key points in each of
them that are worth mentioning as particularly relevant to the issues raised by those who call for a
new reporting model.
Sudipta Basu and Gregory Waymire’s original
and intriguing paper shows that intangibles have
always been – and always will be – of essential importance to economic activity and also that tangibles and intangibles are often inextricably linked.
In addition, the paper provides a helpful analysis
of the reasons why intangibles might have become
more (or less) important.
Douglas Skinner’s paper provides a powerful
defence of the current treatment of intangibles in
the financial reporting model and explains why a
balance sheet that attempted to incorporate all intangibles at current values would probably not provide useful information for investors. Further, it
shows why there are good reasons to be sceptical
of claims that intangibles’ absence from the balance sheet has led to serious – or indeed any – economic harm. It also sets out a cogent argument
against trying to develop a detailed model for useful disclosures about intangibles.
Anne Wyatt’s paper is an extremely helpful review of the existing literature on value-relevance
and intangibles. It demonstrates the almost incredible diversity of potentially relevant information
on intangibles and, interestingly, draws attention to
evidence that giving management discretion to report intangibles might facilitate more value-relevant disclosures.
In contrast to the preceding papers, Christopher
Ittner’s concentrates on measuring intangibles for
management purposes. It exposes important weaknesses or limitations in much of the existing literature on this topic and shows the need for great
caution in making statements about the purported
link between measuring intangibles and improved
performance. Professor Ittner does not address
whether all this has any implications for external
reporting, but I believe his paper will prove to be
very useful from that point of view as well.
Andrew Stark’s paper, as well as giving a valuable overview of the issues and drawing attention
to some of the UK evidence, also has important
conclusions on the desirability or otherwise of imposing a broad disclosure framework for intangibles. He notes that, at least in the UK, it is not clear
that such a framework would be a useful addition
to existing requirements.
Although there are substantial areas of agreement among the five papers published here, it
would be foolish to imagine that the controversy
about intangibles will now go away. Indeed, I am
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 20:43 29 September 2013
170
pleased to see that Baruch Lev has contributed a
rejoinder in this issue – and so to that extent the
debate is not completely one-sided. There also remain important questions, not addressed here,
about the recognition and measurement of intangibles that are candidates for inclusion on the balance sheet even under the existing financial
reporting model.
All of the contributions to this publication – including the practitioner commentaries – will be
most helpful to the ICAEW in our continuing work
on the questions addressed in New Reporting
Models for Business. And I have no doubt that our
forthcoming follow-up report, Developments in
New Reporting Models, will draw extensively on
the material presented. I hope that this issue of
International Accounting Policy Forum will also
ACCOUNTING AND BUSINESS RESEARCH
be of use to all those interested in the debate on intangibles and that it will stimulate further research.
I am grateful to all the distinguished academic
and practitioner contributors to this publication
and, once again, to Pauline Weetman for her support and hard work as editor. Finally, I must thank
the ICAEW’s charitable trusts, which generously
provided funding to support the conference last
December and the preparation of these academic
papers, and the publishers, CCH, who have now
assumed responsibility for financing the publication.
Robert Hodgkinson
Executive Director, Technical
The Institute of Chartered Accountants
in England and Wales
March 2008
On: 29 Sept em ber 2013, At : 20: 43
Publisher: Rout ledge
I nform a Lt d Regist ered in England and Wales Regist ered Num ber: 1072954 Regist ered office: Mort im er House,
37- 41 Mort im er St reet , London W1T 3JH, UK
Accounting and Business Research
Publicat ion det ails, including inst ruct ions f or aut hors and subscript ion inf ormat ion:
ht t p: / / www. t andf online. com/ loi/ rabr20
Introduction
Robert Hodgkinson
a
a
Execut ive Direct or, Technical, The Inst it ut e of Chart ered Account ant s, England, Wales
Published online: 04 Jan 2011.
To cite this article: Robert Hodgkinson (2008) Int roduct ion, Account ing and Business Research, 38: 3, 169-170, DOI:
10. 1080/ 00014788. 2008. 9663330
To link to this article: ht t p: / / dx. doi. org/ 10. 1080/ 00014788. 2008. 9663330
PLEASE SCROLL DOWN FOR ARTI CLE
Taylor & Francis m akes every effort t o ensure t he accuracy of all t he inform at ion ( t he “ Cont ent ” ) cont ained
in t he publicat ions on our plat form . However, Taylor & Francis, our agent s, and our licensors m ake no
represent at ions or warrant ies what soever as t o t he accuracy, com plet eness, or suit abilit y for any purpose of t he
Cont ent . Any opinions and views expressed in t his publicat ion are t he opinions and views of t he aut hors, and
are not t he views of or endorsed by Taylor & Francis. The accuracy of t he Cont ent should not be relied upon and
should be independent ly verified wit h prim ary sources of inform at ion. Taylor and Francis shall not be liable for
any losses, act ions, claim s, proceedings, dem ands, cost s, expenses, dam ages, and ot her liabilit ies what soever
or howsoever caused arising direct ly or indirect ly in connect ion wit h, in relat ion t o or arising out of t he use of
t he Cont ent .
This art icle m ay be used for research, t eaching, and privat e st udy purposes. Any subst ant ial or syst em at ic
reproduct ion, redist ribut ion, reselling, loan, sub- licensing, syst em at ic supply, or dist ribut ion in any
form t o anyone is expressly forbidden. Term s & Condit ions of access and use can be found at ht t p: / /
www.t andfonline.com / page/ t erm s- and- condit ions
Accounting and Business Research, Vol. 38. No. 3 2008 International Accounting Policy Forum. pp. 169-170
169
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 20:43 29 September 2013
Introduction
The five papers in this issue of International
Accounting Policy Forum address different aspects
of the question of intangibles – a highly controversial subject in recent decades.
The points on which there is no dispute are that
intangibles are extremely important, that nevertheless most intangibles do not appear in the balance
sheet and that, with some exceptions, the minority
of intangibles that do appear there are not reported
at their current values. From this common startingpoint people move on to arrive at widely differing
conclusions.
In New Reporting Models for Business (2003),
one of the first reports published by the Institute of
Chartered Accountants in England and Wales
(ICAEW) in its Information for Better Markets
campaign, we looked at some of the most prominent
calls for major reform in business reporting. We
noted that those who called for reform typically:
• asserted that there had been a tremendous
growth in the importance of intangibles and that
they were now the key drivers of business success;
• argued that intangibles’ absence from the balance sheet was a fundamental weakness in financial reporting, which meant that investors
were being seriously misled; and
• concluded that the answer lay in the provision by
businesses of more non-financial, qualitative,
and forward-looking information (although
there were also some calls for reform to financial
reporting).
Hence – and for other reasons that had nothing
to do with intangibles – the calls for a new business reporting model that would tell businesses
what they should disclose.
There seemed to us to be a number of questions
that deserved investigation. And so we commissioned the five papers that now appear here and
which were first presented at the Information for
Better Markets Conference held at the ICAEW in
December 2007.
Without wishing to attempt a summary of the papers, there are one or two key points in each of
them that are worth mentioning as particularly relevant to the issues raised by those who call for a
new reporting model.
Sudipta Basu and Gregory Waymire’s original
and intriguing paper shows that intangibles have
always been – and always will be – of essential importance to economic activity and also that tangibles and intangibles are often inextricably linked.
In addition, the paper provides a helpful analysis
of the reasons why intangibles might have become
more (or less) important.
Douglas Skinner’s paper provides a powerful
defence of the current treatment of intangibles in
the financial reporting model and explains why a
balance sheet that attempted to incorporate all intangibles at current values would probably not provide useful information for investors. Further, it
shows why there are good reasons to be sceptical
of claims that intangibles’ absence from the balance sheet has led to serious – or indeed any – economic harm. It also sets out a cogent argument
against trying to develop a detailed model for useful disclosures about intangibles.
Anne Wyatt’s paper is an extremely helpful review of the existing literature on value-relevance
and intangibles. It demonstrates the almost incredible diversity of potentially relevant information
on intangibles and, interestingly, draws attention to
evidence that giving management discretion to report intangibles might facilitate more value-relevant disclosures.
In contrast to the preceding papers, Christopher
Ittner’s concentrates on measuring intangibles for
management purposes. It exposes important weaknesses or limitations in much of the existing literature on this topic and shows the need for great
caution in making statements about the purported
link between measuring intangibles and improved
performance. Professor Ittner does not address
whether all this has any implications for external
reporting, but I believe his paper will prove to be
very useful from that point of view as well.
Andrew Stark’s paper, as well as giving a valuable overview of the issues and drawing attention
to some of the UK evidence, also has important
conclusions on the desirability or otherwise of imposing a broad disclosure framework for intangibles. He notes that, at least in the UK, it is not clear
that such a framework would be a useful addition
to existing requirements.
Although there are substantial areas of agreement among the five papers published here, it
would be foolish to imagine that the controversy
about intangibles will now go away. Indeed, I am
Downloaded by [Universitas Dian Nuswantoro], [Ririh Dian Pratiwi SE Msi] at 20:43 29 September 2013
170
pleased to see that Baruch Lev has contributed a
rejoinder in this issue – and so to that extent the
debate is not completely one-sided. There also remain important questions, not addressed here,
about the recognition and measurement of intangibles that are candidates for inclusion on the balance sheet even under the existing financial
reporting model.
All of the contributions to this publication – including the practitioner commentaries – will be
most helpful to the ICAEW in our continuing work
on the questions addressed in New Reporting
Models for Business. And I have no doubt that our
forthcoming follow-up report, Developments in
New Reporting Models, will draw extensively on
the material presented. I hope that this issue of
International Accounting Policy Forum will also
ACCOUNTING AND BUSINESS RESEARCH
be of use to all those interested in the debate on intangibles and that it will stimulate further research.
I am grateful to all the distinguished academic
and practitioner contributors to this publication
and, once again, to Pauline Weetman for her support and hard work as editor. Finally, I must thank
the ICAEW’s charitable trusts, which generously
provided funding to support the conference last
December and the preparation of these academic
papers, and the publishers, CCH, who have now
assumed responsibility for financing the publication.
Robert Hodgkinson
Executive Director, Technical
The Institute of Chartered Accountants
in England and Wales
March 2008