In their article entitled ‘U.S. firms challenged to get “intangibles” on the books’ Byrnes and Aubin (2011) noted that in the United States ‘intangible assets such as brands, customer relationships, patents and other information technology are accounted for in one if created in-house and another if acquired’. They noted the following comments made concerning this accounting practice:

The different treatment means a patent that was developed by one company and then sold to another can go from valued at next to nothing, to being worth millions — or even billions — of dollars, almost overnight, said Esther Mills, president of Accounting Policy Plus, a New York-based adviser specializing in complex accounting issues. . .

The accounting difference could result in distorted behaviour, warns Abraham Briloff, a professor emeritus of accountancy at Baruch College, tempting companies to buy intellectual property rather than doing research themselves. . .

Robert Herz, former chairman of the US Financial Accounting Standards Board, said in 2006 and 2007, when his group and the International Standards Board consulted with investors, managers and auditors about what the two standard setters should focus on, accounting for intangibles did not rank as highly as did a number of other subjects.

Required

A. Explain the accounting for internally generated intangibles in AASB 138.

B. Discuss any differences between accounting for internally generated intangibles and acquired intangibles in AASB 138.

C. Discuss why companies may be reluctant to press for changes in AASB 138 to require more recognition of internally generated intangibles.