We argue in this paper that it is the availability of alternative accounting treatments and the use by individual firms of the appropriate method that produces financial statements which are comparable. Accordingly, international harmony in accounting should be seen as a state in which firms throughout the world are able to use an internationally-recognised accounting treatment that is appropriate to their circumstances without being constrained to do otherwise by local accounting regulations or other requirements to adopt practices confined to particular nations. The paper distinguishes harmonisation from standardisation and presents a method for measuring harmonisation which allows for choice between alternative accounting treatments. The statistical model also takes account of the stylised fact that accounting treatments are not mutually exclusive, and the method is illustrated by an analysis of goodwill accounting practices in Europe.

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This paper examines the boundary within which the recognition of an asset currently takes place. It proposes the establishment of a new boundary based upon “separability” which would allow internally created or home‐grown assets to be recognised on the balance sheet. It provides a new definition of brand assets so that, whether purchased separately or as part of goodwill or internally created by a business, brands can be recognised as assets within a new boundary.

Purchased goodwill conforms to the current accounting definitions of an asset. However, as the descriptive framework contained within this paper will show, purchased goodwill is not an asset and, therefore, should not be shown on the balance sheet. This would not necessarily matter, from a marketing viewpoint, was it not for the linkage of brand asset recognition to purchased goodwill asset recognition. Currently, the recognition of a purchased goodwill asset tends to be a prerequisite for the recognition of a brand asset extracted from it. If it can be shown that purchased goodwill is not an asset, then the prerequisite disappears. The widespread recognition of brand assets is then unfettered by its association with purchased goodwill. Weakening the basis for the recognition of a purchased goodwill asset is an important first step in encouraging the accounting profession to devise new ways of dealing with the different kinds of intangible assets that are becoming paramount in the governance of companies.

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