10 marks

IAS 38 provides guidance on accounting for intangible assets. Paragraph 21 states: 21 An intangible asset shall be recognized if, and only if:

1. (a)it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and
2. (b)the cost of the asset can be measured reliably.
3. Many have suggested that these criteria for recognizing an intangible asset are too restrictive. Suggest two other ways that companies might value intangible assets and explain how your suggested approach might be useful to current or potential investors of a company. Be specific in with your suggested measurement method/recognition criteria. It may be helpful to provide examples of intangible assets in your response to this question. (6 marks)
4. Using explicit course concepts, why would standard setters have chosen to utilize the recognition criteria from IAS 38.21 rather than some other criteria (i.e., your suggestions from a)? (2 marks)
5. Assuming semi-strong market efficiency, discuss why changing the accounting for intangible assets might have no impact on the price of a company's shares. In other words, despite multiple opinions about how to account for intangible assets, why might the accounting method chosen not matter for valuing a company? (2 marks)