What financial and non-financial information on intangibles is value-relevant? A review of the evidence

Wyatt, Anne (2008) What financial and non-financial information on intangibles is value-relevant? A review of the evidence. Accounting and Business Research, 38 3 - Special Issue: 217-256. doi:10.1080/00014788.2008.9663336

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Author Wyatt, Anne
Title What financial and non-financial information on intangibles is value-relevant? A review of the evidence
Journal name Accounting and Business Research   Check publisher's open access policy
ISSN 0001-4788
Publication date 2008-01-01
Sub-type Article (original research)
DOI 10.1080/00014788.2008.9663336
Volume 38
Issue 3 - Special Issue
Start page 217
End page 256
Total pages 40
Editor Pauline Weetman
Place of publication London, U.K
Publisher Institute of Chartered Accountants in England and Wales
Language eng
Subject 1501 Accounting, Auditing and Accountability
Abstract This paper evaluates what we have learned about the relevance and reliability of financial and non-financial information on intangibles from the value-relevance literature. Because value-relevance studies do not easily allow judgments about the reliability of information on intangibles, and this is an issue of central interest, this paper takes a rather wide look across a range of literatures to try to piece together some indirect evidence on both relevance and reliability. The evidence from a package of value-relevance and triangulation studies suggests research and development (R&D) is generally not reliably measured and may be less relevant in some contexts than others as well (e.g. established versus growth firms). Further purchased goodwill and some non-financial measures of brands and customer loyalty do not appear to be reliably measured. While a large number of financial and non-financial information is value-relevant, it is difficult to make categorical judgments about most other items, as differences in value-relevance could be due to different relevance or reliability, or both. Several rich areas for future research include designing direct tests of reliability, focusing on settings where intangibles are changing due to shocks, finding new economic benchmarks to test reliability, and studying the impact of accounting discretion and factors such as strategy and capabilities on value-relevance tests of information on intangibles. Two regulatory issues arising from this review paper are the gap in the reporting of separate line items of expenditures on intangibles; and the possibility that giving management discretion, with regulatory guidance, to report intangibles might facilitate more value-relevant information on intangibles.
Keyword Value-relevance
Accounting regulation
Q-Index Code C1
Q-Index Status Provisional Code
Additional Notes Paper presented at the Institute of Chartered Accountants in England and Wales's 2007 Information for Better Markets Conference, London, DEC 17-18, 2007

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
UQ Business School Publications
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