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EFRAG research project on better information on intangibles


In August 2018, following the input received from constituents in response to the EFRAG Research Agenda Consultation, the EFRAG Board decided to add a research project on better information on intangibles to its research agenda. 

The aims of the project are:

  • to explain how entities report on creating, maintaining and/or improving their value;
  • to explain how users consume information on creating, maintaining and/or improving value, and the extent to which current reporting addresses their needs; and
  • to provide suggestions on how information on creating, maintaining and/or improving value can be provided in financial reports in a manner that is useful for decisions on providing resources to the entity.

The project is focused on information provided in the IFRS financial statements, including the notes accompanying the primary financial statements, and the management commentary.

In Q1 of 2019, the EFRAG Secretariat conducted a total of 17 interviews with academics, preparers, users, valuers and other professionals. There was a degree of consensus that that information about the intangibles is lacking in the primary financial statements, however, interviewees expressed a mix of views regarding the possible solutions to the problem.​

On 5 February 2020,  EFRAG published a literature review on the reporting of intangibles. the review was performed by a team from the University of Ferrara following a tender. The literature review, focusing on publications since 2007 provided insight into the following areas:

  • Intangibles in a macro perspective ;
  • Unaccounted intangibles and their impact on the relevance of financial reporting;
  • Information on specific unaccounted intangibles and its impact on company performance, market value and users;
  • Information on intellectual capital and its effects on company performance, market value and users;;and
  • Frameworks and models for measuring and reporting on intangibles and their impact on company performance, market value and users.

In March 2020, EFRAG TEG approved the composition of an Advisory Panel on Intangibles (EFRAG API) which held three meetings over the period, in March; May and July 2020, respectively. The EFRAG API, comprising preparers, users and valuers, is aimed at discussing current reporting practices and challenges and help identify examples of good practice offering selected members a forum for exchanging ideas on how to improve information on intangibles. 

At its April 2020 meeting, EFRAG TEG received an update from the first meeting of the Advisory Panel on Intangibles and discussed the tentative contents of a first discussion paper on problem definition, together with an updated scope of the project

Next Steps and Deliverables

The EFRAG Secretariat plans to issue the following deliverables in further stages of the research project:

    1. Problem Description. Performing activities which will result in gathering information in order to formally define and describe the problem. This phase is expected to be finalised in early 2021.
    2. Input for the EFRAG comment letter on the IASB's project regarding management commentary. This input should be ready for the expected Exposure Draft in December 2020.
    3. Key Information solution. Researching possible solutions to the defined problems. This phase is expected to be finalised in H1 2021.
    4. Testing: testing the identified solutions on different entities including, if possible, testing with the European Corporate Reporting Lab. This phase is expected to be finalised in H2 2021.
EFRAG’s research project on better information on intangibles also provides the opportunity to gather input and insights that could feed into other projects including: 
  • The in-progress consultation on IASB’s Discussion Paper Business Combinations Disclosures, Goodwill and Impairment; 
  • The IASB 2020 Agenda Consultation, in particular regarding the need for an IASB project on intangibles and its possible areas of focus.
  • The developments at EU level on the reporting of non-financial information.
In the course of the research project, the EFRAG Secretariat plans to collaborate with the standard setters and organisations that have already published reports on intangibles.

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