Intangible assets have become increasingly noticeable with accounting due to the larger amounts linked to patents, franchises and brands. Although these items are not purchasable they are generated within an organization and sometimes account for huge differences between market capitalization and book values. Over the years, the International Accounting Standards Board has focused on the uniformity of accounting standards. However, these standards will only be appreciated across the board if they are of unquestionable integrity. This implies that the harmonization process must not only consider the benefits associated with the process, but also eliminate. This paper seeks to ...view middle of the document...
However, different challenges in accounting always necessitate changes in the improvement of accounting standards. Various factors that may influence these changes in accounting regulation include capital market, education, the economy, legal and political issues and culture. (Sawami, n.d.), states that the factors can support or challenge these accounting standards. Countries have different political and legal frameworks, which heavily influence on the accounting standards. For instance, Australia follows common law, thus it cannot be expected to comply to similar standards with other countries. However, the IASB formulates accounting standards that will be fair and equal to all countries.
Sawami, (n.d.), points out that adoption of similar standards internationally will result in a decline in the cost of capital because of an expanded global funding structure as well as alignments between the economic and accounting standards. The federal level of the Australian government formulates the financial reporting and auditing standards for the public, thus they are adopted throughout the country. The International Accounting Standards Board (2010), states that the IFRS supervises the IASB and its work as well as reviews the strategies and structure adopted by the IASB. IFRS is a not-for-profit organization whose conceptual framework focuses on updating and refining the prevailing ideas to accommodate market changes, the economic environment and business practices as they occur.
The IASB faces numerous challenges in the regional and national levels with financial reporting despite its success at the international level. These challenges are elicited by accounting cultures at the national levels that are entrenched in the legal and institutional structures as well as within the market structures that businesses operate in (Whittington , 2008). Australia does not necessarily follow the international standards because its government may see the importanbce of somes things. For instance, it has not adopted accrual reporting like other countries, as it prefers cash-based reporting. Bence & Fry (2012), point out that the inconsistencies of the international conceptual framework presents serious impediments on the advancement towards common national accounting standards.
The IASB defines an intangible assets as identifiable non-monetary assets with no physical substance. In addition, an entreprise recognizes an intangible asset through linking the flow its prospective economic benefits into the business as well as having a measurable value. Therefore, an intangible item that does not fit this criteria is recognized as an expense when it is incurred. On the other hand, expenditure that had previously been acknowledged as an expense cannot be incorporated in the intangible asset’s cost at a future date.
Bentele (2004), research and development have been found to be a critical contributor to the market value and income of firms. Therefore, deliberations on...