The European Financial Reporting Advisory Group (EFRAG) has begun a consultation on its research agenda and is considering a project to develop alternatives to provide more relevant information on intangibles. The EFRAG Secretariat considers that a preliminary analysis of the gap between market valuations and accounting equity would provide good insights for the project by, for example, providing evidence of whether this gap is more commonly found in specific industries. The project is likely to:

• Address a number of aspects in relation to internally generated intangibles. First, it could consider and describe the different categories (marketing, technological, social, and reputational) and how their different features are relevant in terms of financial reporting.
• Investigate how to take into consideration uncertainties in relation to these elements, especially when they cannot be protected legally, or competitors can duplicate them. Uncertainties can exist both in relation to the entity’s ability to access future benefits, and its amount/timing.
• Develop metrics to express earnings potential and value. These metrics may not be fit as a measurement basis but could be used to disclose information in the notes to the financial statements.

A number of initiatives, such as the World Intellectual Capital/Asset Initiative, have already taken steps to improve the reporting in this area. An important part of the EFRAG research project would be to investigate and leverage these other initiatives for financial reporting.