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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 understand how entities report on creating, maintaining and/or improving their value;
  • to understand 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 five meetings from March to October 2020. 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. Several initiatives including the following, were implemented in those meetings in line with the aims indicated above:

  • Share User/Preparer examples of (good) reporting practice and how information is being reported/consumed. Each Industry represented in the API (Pharma, Fast-moving Consumer Goods and IT/Media) was discussed based on members presentations (both users and preparers).
  • Discuss whether and how current accounting framework could be improved.
  • Discuss approaches on intangibles developed by other organisations.
  • Gathering API members views on questions included in the DP/2020/1 Business Combinations-Disclosures, Goodwill and Impairment.​

An additional meeting of the panel is considered for the first part of 2021.

Next Steps and Deliverables

In the coming months, EFRAG TEG will consider the various chapters of the discussion paper with an aim of publishing the discussion paper in mid-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: 
  • EFRAG API members provided input and insights that fed into EFRAGs final comment letter response to the IASB’s Discussion Paper Business Combinations Disclosures, Goodwill and Impairment. 
  • It is also expected that insights from the research will contribute on the revision of the Management Commentary Practice Statement and on the IASB's Third Agenda Consultation, specifically regarding its possible areas of focus and the need for an IASB project on intangibles.
  • The developments at EU level on the reporting of non-financial information.
​EFRAG is also co-sponsoring studies related to its project on better information on intangibles. 
One study is examining whether and how companies disclose information about ther intellectual capital. More information on this study is avaialable at the website of ICAS.
Another study aims at collecting information on the preparation and use of the information on intangibles. More information about that study is available here​.

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