Abstract:
As a consequence of regulatory reforms currently being initiated as part of
international convergence, it is likely that the recognition and disclosure of
identifiable intangible assets by Australian firms will cease. This study provides
empirical evidence on how this will impact financial reports. First, evidence is
provided of a positive association between stock prices and voluntarily recognized
and disclosed identifiable intangible assets. Second, evidence is provided
of a positive association between identifiable intangible assets and realized
future period income. This provides insights into the nature of the information
provided by intangible assets, and identifies a basis for the association between
stock prices and identifiable intangible assets. This leads to the conclusion that
identifiable intangible assets disclosures are value relevant, and that with the
application of the restrictive recognition rules in AASB138 these disclosures in
financial reports will be greatly diminished.
