Comparison of the accounting regulations for intangible assets applied in different national GAAP and in IFRS

Introduction

The aim of this dissertation paper is to depict and analyze the differences and similarities between the accounting treatments regarding intangible assets from several National Generally Accepted Accounting Principles and the accounting treatments regarding intangible assets from International Financial Reporting Standards. Therefore, I have choused to analyze the accounting policies of several countries from the European Union (Germany, France, UK, and others), USA, Canada and several countries from Asia Pacific Zone (India, Japan, China, and Indonesia).

The first part of the paper consists of an introduction to the managerial accounting science, starting with some background information about financial management, institutions and financial accounting, afterwards exhibiting some fundamental concepts about the financial statements: balance sheet, income statement and cash flow statement, followed by some basic concepts and regulations about intangible assets, presented in accordance with the International Accounting Standard 38 “Intangible Assets”.

In the second part of the paper I have realized some comparative analyses of the accounting treatments regarding intangible assets from several National Generally Accepted Accounting Principles across the globe. Consequently, I have emphasized the accounting differences for the most important issues related to intangible assets like for example recognition, useful life, impairment, amortization, research and development expenses, software expenses, revaluation, special treatment for goodwill, and others.

In the third part of the paper I have enumerated all the companies selected for the analysis, by making a brief presentation of each company, its customers, markets, products and services, and last but not least, the accounting policies that each company follows. Because the accounting principles analyzed refer mostly to intangible assets, almost all the companies presented in this chapter activate in the software and computer service sector, which require a large amount of intangible assets. For easier data centralization with the intention of preparing my next step of the analysis, I have made some notations of the concepts and principles presented in chapter 1. Afterwards by applying these notations, I have realized a table of comparison of the common and additional accounting principles for intangible assets followed by the companies presented.

Last but not least, I have drawn some conclusions about the differences and similarities between the accounting treatments regarding intangible assets encountered across the world and the way in which these principles are practically followed by international companies from different continents and countries.

1 INTANGIBLE ASSETS – CONCEPTUAL FRAMEWORK

1.1. Background Information

Finance is the application of economic principles and concepts to business decision-making and problem solving. The field of finance can be considered to comprise three broad categories: financial management, investments, and financial institutions.

(i) Financial management. Sometimes called corporate finance or business finance, this area of finance is concerned primarily with financial decision-making within a business entity. Financial management decisions include maintaining cash balances, extending credit, acquiring other firms, borrowing from banks, and issuing stocks and bonds.

(ii) Investments. This area of finance focuses on the behavior of financial markets and the pricing of securities. An investment manager’s tasks, for example, may include valuing common stocks, selecting securities for a pension fund, or measuring a portfolio’s performance.

(iii) Financial institutions. This area of finance deals with banks and other firms that specialize in bringing the suppliers of funds together with the users of funds. For example, a manager of a bank may make decisions regarding granting loans, managing cash balances, setting interest rates on loans, and dealing with government regulations.

No matter the particular category of finance, business situations that call for the application of the theories and tools of finance generally involve either investing (using funds) or financing (raising funds). Managers who work in any of these three areas rely on the same basic knowledge of finance.

Financial accounting is “a common language developed by accountants over time to define the principles, concepts, procedures, and broad rules necessary for management’s use in a viable accounting system for making decisions and maintaining an efficient, effective, and profitable business.” An accounting system shows detailed information regarding assets, debts, ownership equity, sales revenue, and operating expenses, and it governs recording, reporting, and preparation of financial statements that show the financial condition of a business entity.