International Financial Reporting Standards (IFRS) have different rules on the recognition of intangibles to those in UK GAAP. Commonly asked questions have included: Which intangible assets are being recognised? Are trends developing in different sectors? How much of any premium over net assets is being allocated to intangibles? What valuation techniques are being used?
To answer these questions we conducted a survey focussing on intangible assets acquired in a business combination that are recognised under IFRS, but that may not have been recognised under UK GAAP. To do this, the annual IFRS financial statements of companies that were listed on the London Stock Exchange as FTSE 100 companies on 9th August 2007 were reviewed. The results of the survey, when viewed as a whole, vary considerably. Whilst this was understandable in the year of transition, it has proved to be true for all the years reviewed. As such, even though overall conclusions have been drawn, they should be seen as general indicators only. It is when considering the results for different industries that some clearer patterns start to emerge. However, it is still relatively early days in terms of the number of business combinations reported in accordance with IFRS 3 Business Combinations and although some broad trends emerged, it may be that these change or develop over time. Thus, although the summary of our findings presented below is useful, care should be taken not to assume that the results are necessarily indicative of longer term trends. It is clear from the survey that companies are having to focus more not just on identifying but also on valuing intangibles. We are aware that the difficulties in obtaining reliable fair values is leading to increased use of valuation experts. For further information, download our publication Grasping the intangible. (PDF, 703KB) |
