VALUING THE INVISIBLE UNDER IAS 38: COMPLEXITY AND CONTROVERSY OF INTANGIBLE ASSETS

Abstract

The research paper examines the ongoing theoretical and practical problems related to the recognition and valuation of intangible assets in accordance with IFRS, in particular IAS 38. The problem arises because intangible assets such as research and development, as well as brands, are crucial to corporate value but they have no physical content and active sales markets, and they depend on subjective decisions regarding future profitability. Based on a scientific literature review, the research found that while IAS requires recognition through identification, control and expected future benefits, companies predominantly use the cost model for subsequent measurement due to the absence of active markets. Theoretically, an income-based approach provides a good representation of fair value, they are rarely used due to their complexity, like their market price and the financial statements may not reflect the true economic benefit of the assets, and data requirements. The results show that the choice of valuation methods is primarily influenced by the characteristics of assets and the accessibility of data, despite that cost model is most useable one, the income approach is better suited for estimating fair value. However, it is limited by its complexity and resource requirements