The UK’s FRC is not alone in its expectations for improved reporting on intangible assets, as BVWire—UK has previously reported (see our commentary from the 4 February 2020 edition). IASB and many other regulatory organisations have published and discussed the topic in the last 18 months. Little change has resulted, and many believe the most likely alterations will introduce further confusion for investors, management, and fiscal authorities—all without notably improving the current regime.
FRC’s new Feedback Statement on Business Reporting of Intangibles: Realistic proposals received input from many in the business valuation profession, as well as ACCA, ICAEW, RICS, and the Big Four in the UK. The CFA Institute have also been active in this debate and have published research reports on the impact of various new schemes. Responses are available as an appendix to the Feedback Statement.
While business valuers and the rest of the financial industry would all like clearer reporting of intangibles, FRC follows other groups that have received concerned feedback. FRC’s summary concludes:
The main reservation expressed about the proposals in the Discussion Paper was that, given the inherent measurement uncertainty relating to intangible assets, and the difficulty in identifying future-oriented expenditure, efforts to provide greater transparency would lead to highly subjective disclosures and involve a high degree of management judgement. There were also concerns around the commercial sensitivity of the information and compliance costs.