Date: 26th May 2021

Intangibles are critical to the business model of many companies, and fundamental for explaining the value creation process particularly as we continue to move towards a knowledge-based
economy. Notwithstanding their relevance, they largely do not appear on financial statements or in the related disclosures, especially when they are internally generated.

In this light, EFRAG (the European Financial Reporting Advisory Group), ICAS (the Institute of Chartered Accountants of Scotland), and EFFAS (the European Federation of Financial Analysts Societies) decided to jointly support a research project to be carried out by a team from the University of Ferrara (Italy) with the aim to provide evidence and to hear the opinion of preparers and users, as well as other relevant professional and institutional actors, on the production and consumption of the under-reported information on intangibles.

BETTER FINANCE provided input to the questionnaire on the issue provided by the research team.

The main issue is the complexity involved in measuring and valuing intangible assets in the financial reporting of the company. However, information on intangibles could represent an added value in terms of non-financial reporting in particular with a view on assessing the sustainability of the company. Specific rules and recommendations on how to assess and measure intangibles are necessary in order to streamline the information disclosure of these companies’ assets. This is particularly relevant with the rise of big tech companies which rely on intangible assets such as brand value, consumer satisfaction and loyalty, etc.