New push to explore realignment of intangible asset disclosures

BVWireIssue #228-3
September 22, 2021

brand value, goodwill, intangible property, fair value measurements, intangible valuation, identifiable intangibles

Long overdue is a re-examination of the reporting and disclosure framework for intangible assets (IA). Even though IA is a powerful driver of corporate value, only a small fraction of it shows up on balance sheets. And what’s disclosed bears no relation to the total amount of IA because so much of it is internally generated and not required to be disclosed.

Series of papers: “Time to Get Tangible About Intangible Assets” is the first paper in a three-part series from the International Valuation Standards Council. The paper’s subtitle reveals its goal: “The case for realigning reporting standards with modern value creation.” Like a predecessor IVSC series on goodwill, the paper is well thought out and written by Kevin Prall (BDO), IVSC business valuation technical director, with contributions from the IVSC Business Valuation Board. The second paper in the series will take a deeper dive into the issue, and the third paper will present an analysis of potential frameworks.

The dollar amount of IA has hit $15 trillion worldwide—but this is just IA that has been disclosed, that is, the IA that has been acquired through third-party transactions—and it’s only a small fraction of the total. During a recent webinar, respondents were asked: “How strong do you think is the quality of global IA disclosure today?” Only 5% of respondents said “strong,” while 35% said “weak,” with the majority (59%) saying “mixed.” The need is definitely there for a fresh look at this issue.

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