Intangible Assets: Diversity of Practices and Potential Impacts from AIFRS Adoption

The adoption of Australian equivalents of International Financial Reporting Standards (AIFRS) radically alters Australian accounting practices for intangible assets. Under AIFRS, goodwill amortisation expense is replaced by goodwill impairment loss based on frequent tests of the value of goodwill, and Australian firms are no longer permitted to recognise certain internally generated intangibles. This paper provides statistics regarding intangible asset reporting by 476 firms listed on the Australian Stock Exchange in 2002. We find significant diversity in reporting practices relating to both goodwill and identifiable intangible assets. Accordingly, the new accounting rules will potentially reshape ASX-listed firms' financial statements by significant amounts.