Accounting recognition of intangible assets: Theory and evidence on economic determinants

Wyatt, Anne (2005) Accounting recognition of intangible assets: Theory and evidence on economic determinants. The Accounting Review, 80 3: 967-1003. doi:10.2308/accr.2005.80.3.967

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Author Wyatt, Anne
Title Accounting recognition of intangible assets: Theory and evidence on economic determinants
Journal name The Accounting Review   Check publisher's open access policy
ISSN 0001-4826
Publication date 2005-07
Sub-type Article (original research)
DOI 10.2308/accr.2005.80.3.967
Volume 80
Issue 3
Start page 967
End page 1003
Total pages 37
Place of publication Sarasota, Florida, U.S.
Publisher American Accounting Association
Language eng
Subject 15 Commerce, Management, Tourism and Services
1503 Business and Management
Abstract This paper examines the extent to which management makes accounting choices to record intangible assets based on their insights into the underlying economics of their firm. It exploits a setting in which management has accounting discretion to record a wide range of intangible assets. The results suggest that management's choice to record intangible assets is associated with the strength of the technology affecting the firms operations, the length of the technology cycle time, and property-rights-related factors that affect the firm's ability to appropriate the investment benefits. These effects are more important than other contracting and signaling factors consistent with the underlying economics operating as a first-order effect as envisaged by GAAP. The results also indicate that the intangible assets management has a voluntary (unregulated) choice to record - identifiable intangible assets - are more highly correlated with underlying economic factors than the regulated classes, purchased goodwill and R&D assets. This result suggests that limiting managements' choices to record intangible assets tends to reduce, rather than improve, the quality of the balance sheet and investors' information set.
Keyword Financial reporting
Intangible assets
Property rights
Q-Index Code C1

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
UQ Business School Publications
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Citation counts: TR Web of Science Citation Count  Cited 35 times in Thomson Reuters Web of Science Article | Citations
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Created: Thu, 07 Jan 2010, 10:05:08 EST by Macushla Boyle on behalf of Faculty of Business, Economics & Law