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1. The International Accounting Standards Committee (IASC)
The International Accounting Standards Committee (IASC) is an independent, private sector body, formed in 1973 and restructured in May 2000 with the objective of harmonising the accounting principles which are used by businesses and other organisations for financial reporting around the world. The members of IASC currently number 143 professional accounting bodies in 104 countries representing over 2,000,000 accountants worldwide.
The International Accounting Standards Committee (IASC)
1. The International Accounting Standards Committee (IASC)
It is responsible for developing and approving International Accounting Standards. IASC's work has the worldwide support and involvement of the business community, financial executives, financial analysts, stock exchanges, securities regulators, lawyers, and bankers. Info: IASC also works closely with the national standard setting bodies, securities regulatory agencies and stock exchanges in individual countries, intergovernmental organisations -- such as the European Commission, the OECD, and the UN and development agencies such as the World Bank.
IASC recognise that investments in, and awareness of the importance of, intangible assets have increased significantly in the last two decades. It has worked for almost 10 years to produce an International Accounting Standard on Intangible Assets. Therefore, in October 1998, IASC published "IAS 38, Intangible Assets". IAS 38 applies to all intangible assets that are not specifically dealt with in other International Accounting Standards. It applies, among other things, to expenditure on advertising, training, start-up, research and development (R&D) activities and it supersedes IAS 9, Research and Development Costs.
According to IASC, the development of IAS 38 was controversial and raised debates on two significant issues in particular:
According to Gilbert Gélard, Chairman of the IASC Steering Committee on Intangible Assets:
"IAS 38 is a step forward towards the separate recognition of intangible assets for the better understanding by users of financial statements of investments in intangible assets". IASC's Secretary-General, Sir Bryan Carsberg said: "Knowledge about intangible assets, particularly how to value them, is still in its early days. IAS 38 reflects the current limits of this knowledge, focusing on reporting the cost of intangible assets. There is growing demand for further information on the value of intangible assets using financial and non-financial indicators, maybe not as part of the financial statements. Debates on the subject are very much alive. The IASC will watch the developments in this area and may do more work in the future when preparers and users have gained more experience on the value of intangible assets."
However, many observers consider that this statement delimits rather than extends the possibilities to capitalise intangibles. This issue has been addressed in a conservative way. Thus, according to Ulf Johanson and Jan-Erik Gröjer (report of workshop on "To manage and Account for Intangibles - February 1999 - Brussels):
"it is important to note that IASC has never approached the issue of how to separate and label expenses on intangibles; nor has it dealt with the issue of qualitative information about intangibles (...). The conservative approach of the IASC and other national standard setting authorities is not very surprising. The standard setting bodies are not expected to take the lead in the issue of accounting for intangibles; in complex matters they are supposed to take the position of codifying best practice."
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2. The International Federation of Accountants (IFAC)
IFAC is an organisation of national professional accountancy organisations that represent accountants employed in public practice, business and industry, the public sector, and education, as well as some specialised groups that interface frequently with the profession. IFAC strives to develop the profession and harmonise its standards worldwide to enable accountants to provide services of consistently high quality in the public interest. It aims, among others, to provide an international forum for exchange of information regarding current developments and emerging issues that shape the management accounting profession.
In that perspective, the Financial and Management Accounting Committee (FMAC) of IFAC has commissioned a study in 1998 to Ramona Dzinkowski, President RND Research Group, entitled "The Measurement and Management of lntellectual Capital". The objective was "to discuss some of the major issues surrounding the measurement and management of intellectual capital and the accountant's role in this process. It was intended to provide an introduction to the accounting challenges and opportunities associated with intellectual capital management by discussing its underlying concepts and describing merging practices". The conclusion was that it is recognised that the intellectual capital of a firm plays a significant role in creating competitive advantage and that there is a demand from managers and stakeolders that its value be measured and reported for planning, control, reporting and evaluation purposes. However, "at this stage, there is a great deal of room for experimentation in quantifying and reporting on the intellectual capital of the firm". Developing comparable intellectual capital measures and reporting practices remains one of the key challenges for the accounting profession. IFAC support the growing effort to understand the complexities of Intellectual capital management but recognises that there is a long way to go for generally accepted and endorse practices to evolve.
Several other studies, papers and guides are undertaken by IFAC on some specific intangible assets such as Information Technologies and Internet. These studies are available on the IFAC web site.
Finally, IFAC has established an "International Forum on Accountancy Development" (IFAD). The objective is to objective is to improve the quality of financial reporting and audit world-wide.
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