Issue to be investigated: Intangible Assets
Accounting for intangible assets continues to be a contentious standard-setting issue. Standard setting bodies around the world, including the Financial Accounting Standards Board (FASB) in the United States, the Australian Accounting Standards Board (AASB) and the International Accounting Standards Board (IASB), are holding discussions about what improvements (if any) should be made in the recognition and measurement of intangible assets.[1] Such debate stems from criticisms that, due to a changing business environment where intangible assets are increasing in prevalence and magnitude, current accounting standards prevent a company from reporting its true value.
You have recently been appointed as a graduate accountant in a company listed on the Australian Securities Exchange Top 200 (ASX200) Woolworths, and are currently reporting to the Chief Financial Officer (CFO). The CFO of Woolworths has been asked to respond to a recently convened focus group of the AASB on what changes (if any) should be made to the recognition and measurement of intangible assets.
You are to research and comment on why accounting for intangible assets is a controversial issue and present your findings as follows:
A business report to update the CFO and the board of directors on whether and how current accounting requirements limit your company's recognition of all intangible assets.
(i) Provide a recommendation which your CFO can take to the focus group of the AASB. Support your position and discussion with reference to theories covered in this unit and academic journal articles.