EFRAG research project on better information on intangibles

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, valuation professionals 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), comprising preparers, users and valuation professionals. EFRAG API provided input on which EFRAG's Discussion Paper Better Information on Intangibles - Which is the best way to go? ​was based, and provides input to other issues and projects considering intangibles.

EFRAG Discussion Paper​

​ ​On 27  August 2021, based on input from the EFRAG​ Advisory Panel on Intangibles, EFRAG published the Discussion Paper Better Information on Intangibles - Which is the best way to go? The Discussion Paper presents different possible approaches to improve information on intangibles together with the related advantages and disadvantages. 

The Discussion Paper focuses on information to be provided in the financial statements, including the notes, and in the management report, and considers information on intangible sources of possible economic benefits other than financial assets. The scope of ‘intangibles’ is thus broader than intangible assets and covers sources of possible economic benefits that would not be controlled by an entity. The Discussion Paper focuses on intangibles used in the entity’s operation. Constituents are consulted on the possible approaches including whether/how they should be combined.

The input from constituents is considered to be useful for the IASB and EFRAG when considering current and future proposals related to intangibles. Comments were welcome by 30 June 2022.

Academic studies

​EFRAG has co-sponsored studies related to its project on better information on intangibles.