Intangible Asset Essay

sn beThe routine of this study is to examine some(pre noinal) issues when dealings with nonphysical summations. By agency secondary explore, relevant evidence from umteen sources was selected, evaluated and organized into three main points, which be investigate and increase apostrophize, punctuate military rank and the pretend of intangible plus asset plus summation in monetary statement in similarity with tradeplace and obtain honour. The evidence includes statistical data and expert opinion. The seek events that intangible assets give a evidential push to the club if they argon not quantity appropriately base on the chronicle standards. found on these hapings, it is argued that intangible asset would profess callers procedure if in that location are misjudgments in the valuing of these assets. ledger entryFinancial statement has a signifi nookyt role in businesses system in referable to transparency of fellowships fiscal position in the businesses surround. The purpose of pecuniary promulgate is to give substantial information about any changes in associations performance that is effectual for a wide range of users in making stopping point making in array to fixate investment in that even offt go with. harmonize to FASB that is state in Canibano, Garcia-Ayuso, & Sanchez (2000, p.102), financial statement should provide a useful information that go forth bring in to any potential investors and creditors to defecate encourage investment, credit and similar decision. Therefore, any final result that will affect clubs performance either present or time to come should be presented in this annual report. During last 20 years, expansion in technology, sparing system and people cognition remove brought many changes in businesses environment which increase the use of media due to much disceptation amidst companies and smart sets feasibility in the future.Due all told these changes as stated in Can ibano, Garcia-Ayuso, & Sanchez (2000, p.102) the resourcefulness of wealth and future economic win is not from material yieldion or tangible asset scarcely from expend and management of intangible asset. As outlined in paragraph 8 of AASB 138 that is tell in Picker et al (2006, p. 313) intangible asset is an identifiable non m unmatchabletary asset without physical substance. There are two main forms of intangible asset, introductory legal intangible such as great dealmark, patent, brandand some other thing that defendable in the court and the second one is competitive intangible such as acquaintance activities and other activities that have a direct impact and effectiveness to companys performance (Wikipedia, 2010, accessed 15/05/10). impalpable asset is one of accounts that should present in the financial statement this is however, by displace intangible assets in the financial statement, this report would be less informative be bear they gain ground the operoseies of estimation of market take to be and book value which pot affect the companys performance. It preserve be argued that on that point are some issues that mount when dealing with internally haved assets. Therefore, in this essay the power will discuss possible issues that can arise in intangible asset such as inquiry and development cost, brand valuation and the risk of intangible assets in financial report in relation with market and book value.R&D costIn order of magnitude to expand intangible asset, companies need to hand much silver in research and development (R&D) due to market competition to get more usefulness. This depreciate is comparatively expensive and continuous until the de applys can find a in the raw finding in intangible asset that can change companys performance. This statement is alter by Canibano, Garcia-Ayuso, & Sanchez (2000, pp.108-109) argument which states that amid R&D and future economic profit had not been con crockeded thoroughly because there were no confirmation that can be found in relation with expanding research and development a juvenile harvest-home can track down future improvement in the companys performance. Changes in the R&D can cause a divergences between profit individually year and also enlarge the contravention between cash flow that is rattling generated by firms and profit that is stated in financial statement because a new product of the research is about to be commenced and generated revenue later (Wrigley, 2008, p.258).Furthermore, in find out research and development cost, this activity will lead to greater amount of depreciate in balance because when any outgo for research incurred, it will be save as expense and it will affect companys performance which can be a huge disadvantages for companies. If there are more expense that company generates as a result of research and development in one write up period, it will decrease value of profit which lead to a negative expected value to investors because the investors will start to doubt with the companysperformance if they see more expenses than profit during the year. An character arises from Sigma Pharmaceuticals Limited (SIP) that was ontogenesis a new product that have a purpose to measure light speed gas emission in order safe the environment (Sigma Pharmaceuticals Limited 2009, p.5).Based on SIP summary of decomposable accounting policy, R&D cost would be capitalised if the research bring a future economic benefit or can be sold to other parties (Sigma Pharmaceuticals Limited 2009, p. 54). This means that SIP would put down a lot of money to make this research success and able to generate profit but it is more expense would be generated during this research that has possibility to sheer the profit in that year. another(prenominal) meaningful example is from Rolls-Royce Company, in 1960s because of R&D expenditures Rolls-Royce Company couldnt make profit (Yardimcioglu 2008, p.91).This explanat ion can be conclude that even companies increase their research and development to find a new intangible asset such as patents that have foreboding to bring more profit to the particular corporation, the firms legato do not have control to this expectation because of skepticism in the future economic benefit. It also gives negative impact to firms performance in investiture activities because it will affect the investors confidence to put their investment in a particular companys. imperfection valuationBrand valuation has appeared as issues that arise from cadence intangible asset in financial report of companies. This is because of the deficient of perceptive and valuation from accounting standard in cadence brand in a firm that broadly speaking lead to uncertainties between good will and other intangible assets. Brand can be defined as a unique symbol or trade mark that is used to identify goods and work differently from its competitors (Tollington, 1998, p.180). The occu pation that occurs from brand as intangible asset is from useful vivification of it because brand does not have a fixed spiritedness which can lead to misjudge of indefinite and definite life of other intangible asset (Seetharaman et al, 2001, p.247). Another problem that arises from brand measurement is the difficulties of farsightedness in maintaining the value of brands in a period of time, for example, well known brand like Ferrari, Marlboro and Coca Cola mostly have a stable value if compare with forgotten brand that may have less value (Seetharaman et al, 2001, p.247).In the most case, it has been debated that the value of brand asset could be measuredappropriately because in order to evaluate brand value, the company will use relief from royalty. However, royal house rate is not always available and often the rate used is based on the companys decision rather than reliable source in that particular company. If the royalty rate is withal high, it could be destroy the co mpanys profit that could earn (Sinclair & Keller, 2007, accessed 16/05/10). find in financial statement. nonphysical asset that takes a place in financial statement would create significant risk in relation with companys performance. This is because the values of intangible assets have not exhibited in the financial report due to lack of measurement on intangible asset such as trademark, knowledge of employees and development of technology. An example of the risk that is reflecting the difficulties of measuring rod rod intangible asset value is from Nokia Corporation. According to the data from Yardimcioglu (2008, p.91), financial position that stated on financial statement in 1999 was US$11 billion of radical asset, liabilities were US$5.3 billion and residual cost US$5.7. In 2000, Nokias market value was US$190 billion and made US$183 billion differences between book value and market value, and this differences arise because intangible asset that Nokia possessed. This differen ce should be stated in the financial statement, but after one year Nokias market value has decreased to US$97 billion and if the difference of market and book value was stated in the financial position, Nokia would lose profit by US$86 billion.Another example of the risk of intangible asset in financial statement is Rolls Royce Company this company has suffered a loss in 1960s that lead to serious financial issues because of carry-over of more sources to R&D regale (Yardimcioglu, 2008, p.91). Based on these two examples, measuring intangible asset is quite difficult because ,,, it is impossible to supply the deficiency between book value and market value in consequence of taking the intangible assets into financial statements (Yardimcioglu, 2008, p.91). In conclusion, there are some issues that arise from valuing of intangible asset in a corporation.This issue is including uncertainty of research and development cost that still cannot be ascertained to make future economic benefit s, brand valuation because understaffed measurement for this intangible assets and the risk of putting intangible asset in financial report. Companies should do some actions tosolve this problem that might be useful for companys management or even for investors who are willing to invest their money to the company. First, maximise the use of intellectual holding by expanding only small correspondence of patents. Second, introduce a new product to the market that will possibly generate an innovation and third, technologies involvement (Hand & Lev, 2003, pp. 511-512).ReferencesCanibano, L, Garcia-Ayuso & Sanchez, P 2000, accounting system for Intangible A Literature Review, diary of accounting system Literature, vol.19, pp.102-130. Hand, J, R, M & Lev, B 2003, Intangible assets values, measures, and risks, Oxford University Press, London, accessed 14/05/2010, http//books.google.com.au/books?id=RmFLUk7NydQC&printsec=frontcover&dq=intangible+assets&source=bl&ots=1QtSgbhUPK&sig=Nsy8 mguyyw6tV8-FUAqpWi6pzVw&hl=en&ei=jNfsS96tM47U7APH_tiMBg&sa=X&oi=book_result&ct=result&resnum=7&ved=0CDoQ6AEwBgv=onepage&q&f= irrational Picker, R, Leo, K, Alfredson, K, Pacter, P & Wise, V 2006, Australian Accounting Standards, John Wiley & Sons, Queensland, Austalia, Seetharaman, A, Azlan Bin Mohd Nadzir, Z & Gunalan, S 2001, A Conceptual Study on Brand Valuation, Journal of result & Brand Management, vol.10, no.4, pp.243-256. Sigma Pharmaceuticals Limited 2009, Annual field 2008-2009, accessed 14/05/2010, http//sigma.ice4.interactiveinvestor.com.au/Sigma0901/Annual%20Report/EN/body.aspx?z=1&p=-1&v=2&uid= Sinclair, R & Keller, K, L 2007, Determination of light Value of Intangible Assets for IFRS Reporting Purposes, transnational Valuation Standards Committee (IVSC), pp.1-6, accessed 14/05/2010, http//www.ivsc.org/pubs/ chin wag/intangibleassets/06_keller.pdf Tollington, T 1998, Brands the asset definition and perception test, Journal of Product & Brand Management, vol. 7, no. 3, pp. 180-192. Wikipedia 2010, Intangible Asset, accessed 14/05/2010, http//en.wikipedia.org/wiki/Intangible_asset Wrigley, J 2008, discourse of What financial and non-financial information on intangibles is value-relevant? A review of the evidence, Accounting and channel Research, vol.38, no.3, pp.257-260. Yardimcioglu, M 2008, The Risk of Intangible