What financial and non‐financial information on intangibles is value‐relevant? A review of the evidence

Intangibles and research – an overview with a specific focus on the UK

“…First, it supports the notion that the IAS, in removing discretion over the treatment of development expenditures, remove a useful way for firms to communicate information to the stock markets. Further, it accords with the evidence discussed in Wyatt (2008) for Australia. We might conclude that, although the IAS solution might be purer in accounting terms, purity of accounting might not be an absolute informational virtue.…”

“…3 2008 International Accounting Policy Forum. 277 reached by Green et al (1996: 210) is that '… it would be difficult to accuse the market of totally ignoring the value-relevance of past research and development expenditures that are yet to have an effect on earnings' -not necessarily the most ringing endorsement of the value relevance of R&D expense (as pointed out by Wyatt, 2008). Stronger evidence, however, is provided by Stark and Thomas (1998) who, although not focussing on the value relevance of R&D expense, nonetheless effectively update Green et al (1996).…”

“…under investment, difficulties in raising capital, etc., primarily related to technology firms and research and development (R&D)) -he argues it cannot. Wyatt (2008) provides an extremely comprehensive analysis of the associations between financial and non-financial information on various types of intangibles and market value or returns (a real boon to academics!) -the work surveyed is global, although much of it emanates from the US.…”

Intangibles, Export Intensity, and Company Performance in the French Wine Industry

“…9 Unlike authors of studies on large companies, we cannot use direct accounting expenses or assets for two main reasons. First, intangible expenses and assets recorded in financial statements are not considered completely reliable by researchers in accounting (for a review, see Wyatt, 2008) because intangible resources are composed largely of items that do not appear in financial statements (Carmeli, 2001). Second, data such as "R&D expenses," "goodwill," or "intangible assets other than goodwill" (patents, trademarks, copyrights, licenses, etc.…”

Recognized intangibles and the present value of growth options

“…In contrast to investments immediately expensed recognized intangibles are subject to proprietary contracts that better secure the cash flow rights derived from these assets. Wyatt (2008) finds that ensuring property rights allows managers to disclose purchased intangibles in line with the firm's underlying economics thus reducing information asymmetry and improving the value relevance of the balance sheet and investors' information set. Gu and Wang (2005) find the analyst forecasting error increases with the level of recognized intangibles indicating that even expert users of financial statements have difficulty in processing complex information regarding intangibles.…”