Intangible Assets Accounting and Reporting Issue

Abstract

The article examines the views of foreign economists on the importance of the impact of intangible assets (IA) and goodwill on business. The main purpose of this study is to improve and develop approaches of accounting for IA and goodwill, reflecting them in the financial and management reporting. The systematization of literary sources and the study of regulatory documents showed that there were several problematic issues related to the accounting and reporting of IAs and goodwill that needed elaboration and clarification. The urgency of solving this scientific problem lies in the fact that due to the existence of unresolved issues in accounting for IA and goodwill, as well as the formation of indicators in the financial statements, there is a significant gap between the methodology of accounting for these assets and current requirements of the economy. It is proposed to amend the Methodological Provisions № 417 by allocating the IA into a separate group for more detailed state statistical observation of these assets. It is recommended to separate the subaccount for accounting software showing the detailed information for this subaccount in the Notes to the Annual Financial Statements. To reconcile goodwill with the Plan of Accounts and Reporting, it is offered to set out the title of Section 1 of the Notes to the Annual Financial Statement, as follows: «Intangible Assets and Goodwill». It is recommended to keep records of internal goodwill in managerial and financial accounting, with the separation of the subaccount, with amendments to Section 1 of the Notes to the Annual Financial Statements regarding the inclusion of additional line 095 «Internal Goodwill». For management accounting of IA and goodwill, it is proposed to use the form of internal management reporting, which is based on paragraph 5 «Notes to the Annual Financial Statements», which contains additional indicators that allow the management system to identify IA s both at the respective centres of responsibility and their units, for different periods, to control the amount, direction, deviation of the planned and actual expenses at the receipt of IA, etc. It is recommended to open an additional subaccount for accounting for IAs shortages with the disclosure in the Annex to Methodological Recommendations № 1327 of the procedure for accounting for IAs shortages using this subaccount. It is justified that the Management Report should be considered as a supplement to the financial statements. The management report proposes to disclose the information about the IA and, if available, about goodwill (internal goodwill), and to provide information aimed at the development of intellectual capital. Keywords: brand, internal goodwill, management report, management report, identification, intellectual capital, intangible assets (IA); non-current assets, accounting, managerial reporting, financial reporting.

Devising an integrated approach to assessing the indicators of personnel innovativeness under conditions of innovative development of an enterprise

“…Research [22,23] proposed a number of clarifications of the interpretations of the concept of "intangible assets" in various normative and legislative acts of Ukraine, which combine economic, accounting, legal, and evaluation aspects.…”

Measuring intangible assets—A review of the state of the art

“…Baruch Lev and others have voiced critiques on the treatment of intangibles in accounting rules, arguing that by not recognizing value-creating resources as assets, financial reports fail to state the true value of companies (Chalmers et al, 2008;Lev, 2018b;Lev et al, 2005;Lev & Gu, 2016;Zadorozhnyi & Yasyshena, 2019). Current accounting rules create a bias with greater understatement of the earnings and assets of companies with growth in intangibles investments and overstatement for companies with declining investment.…”

“…Rules according to the International Financial Reporting Standards (IFRS) 3 are similar, though allow for the capitalization of development costs when strict conditions are met concerning certainty in terms of feasibility and financing for project completion. Baruch Lev and others have been very critical of the treatment of intangibles in accounting rules, arguing that by not recognizing value-creating resources as assets, financial reports fail to state the true value of companies (Chalmers et al, 2008;Lev, 2018b;Lev et al, 2005;Lev & Gu, 2016;Zadorozhnyi & Yasyshena, 2019). Furthermore, they create a bias with greater understatement of the earnings and assets of companies with growth in intangibles investments and overstatement for companies with declining investment.…”

Еволюція Обліку Нематеріальних Активів І Його Трансформація До Міжнародних Вимог

“…Therefore, it is necessary to separate the sub-account to account directly for computer programs. The chart of accounts for account 12 «Intangible assets» lacks sub-account 126, which can be used to account for software (computer programs, the right to firmware for software devices) [25]. In Accounting regulations (standards) 8 «Intangible Assets» and Methodical recommendations on accounting of intangible assets 1327, the group of copyright and related rights includes such IAS as programs for electronic computers.…”