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ABSTRACT
International Accounting standards: The aim of this research was to evaluate how the current accounting standards (IAS 38) for intangible assets apply across different industries while examining the value relevance of intangible assets and how they affect company value. The objectives included: highlighting the importance and features of IAS 38 for intangible assets; examining the application of IAS 38 for intangible assets across different industries; examining the relationship between intangible assets and company value; and examining the application of IAS 38 for intangible assets and the relationship between intangible assets with company value in two UK based companies.
The research adopted a qualitative and secondary methodology coupled with a case study approach. As part of the former, the academic literature was evaluated and explored in accordance with the identified research questions, while as part of the latter two UK based companies were selected as case studies i.e. Sage Group PLC from the IT sector and Greenergy from the energy sector. The aim of a selection of companies from diverse industries was to identify the differences in treatment of the intangible assets. Apart from the research objectives, the main questions of research also included: evaluating the flexibility with a company’s management to influence the accounting, recognition and valuation of the intangible assets under IAS 38; reporting of intangible assets under IAS 38 by the contemporary companies; and measurement of value relevance and identification of methodologies being used for measuring value relevance of intangible assets under IAS 38.
It has been concluded that goodwill under IAS 38 is treated according to the acquisition method of accounting while using fair value and other intangible assets are capitalised at cost and written off over their life period. On the other hand, within R&D, all development expenses are capitalised and amortised. It has also been concluded that the nature of the industry is of some influence with regards to the recognition, classification, the realization of revenue and treatment of intangible assets, while goodwill is treated almost uniformly across both IT and energy sectors. Similarly, with regards to the treatment and allocation of the development expenses within R&D, both industries differ as in the IT industry development is not separate from research as in the case of the energy sector.
ACKNOWLEDGEMENTS
RESEARCH FRAMEWORK
This dissertation is organised into 5 chapters as under:
Chapter – 1: Introduction
This chapter provides an overview as well as a brief introduction to the subject along with with the aims and objectives.
Chapter – 2: Literature Review
This chapter introduces readers to the various intricacies of the subject through an in-depth academic review of the literature.
Chapter – 3: Methodology
This chapter lays down the research methodology adopted towards answering the objectives of the dissertation.
Chapter – 4: Findings & Analysis
This chapter encompasses the analysis of the findings of the dissertation.
Chapter – 5: Conclusion
This chapter answers the dissertation objectives and concludes the findings of the dissertation with recommendations for further research.
CHAPTER – 1: INTRODUCTION
1.1 Background & Introduction
An intangible asset as per definition is an identifiable, non-monetary asset without physical substance (Ritter & Wells, 2006; and Gerpott, Thomas & Hoffmann, 2008).
Intangibles are becoming steadily more and more important in all sorts of businesses and their practical examples include customer assets, employees, intellectual capital, and structural capital et cetera (Martín-de-Castro Et al., 2011). Intangible assets measurement is never simple, these are not properly defined and also in traditional accounting, intangible assets were never accorded the due consideration.
Over a period of time, the value factor of the intangible assets has assumed significance for contemporary companies. It thus became vital for the stock market, the boards of directors of companies, their management and other stakeholders that intangible assets are properly accounted for and their value is acknowledged (Cohen & Kaimenakis, 2007).
In June 2000, all the listed companies of Europe were forced to draft their consolidated final accounts in accordance with one definite accounting standards collection, namely the IAS, in complete accordance with the instructions and directions of the European Commission. The Commission acknowledged that financial reporting is a key part of achieving an efficient market within Europe (Ball, 2006). Hence, according to the recent accounting practices, the valuation of the intangible assets for the European listed companies is linked with the International Accounting Standard (IAS) 38; while the valuation of intangible assets for the US listed companies is based upon the standard Financial Accounting Standards (FAS 142) (Beatty & Weber, 2006).
IAS 38, while outlining the accounting requirements for the intangible assets, defines these assets as non-monetary in nature, devoid of physical substance and recognizable on the basis of their unique identity or any legal or contractual rights associated with these assets. According to IAS 38, if an asset is classified as intangible on the basis of the laid out recognition criteria, it is originally measured at cost. Thereafter in case an intangible asset enjoys a definite useful life, it is either continued to be measured at cost or can be subjected to the revaluation model, while being systematically amortised over the complete duration of its useful life. However, if an asset has an indefinite useful life, it is only measured at cost and not amortised (Stolowy, Haller & Klockhaus, 2001). In March 2004, IAS 38 was reviewed to extend its application to the intangible assets, being recognised or acquired on or after 31 March 2004. For other intangible assets, IAS 38 was deemed applicable for annual periods beginning on or after 31 March 2004 (Lhaopadchan, 2010).
In general, an intangible asset must be reported on the Statement of Financial Position i.e. the Balance sheet; provided the intangible asset is acquired and valued based upon its cost or when the intangible asset has been internally generated. However, it is interesting to note that the valuation technique or methodology of the intangible assets requires in several ways the subjectivity of a company’s management, in accordance with the IAS 38 (Powell, 2003).
As far as management’s influence on the valuation of the intangible assets is concerned, there are several priorities which dictate this influence. Management’s first priority is to ascertain whether an intangible should be valued and recognized on the possibility of anticipated future economic benefits and associated costs, both of which should be reliably measureable. Secondly, the management should evaluate the likelihood of anticipated future economic benefits flowing from an intangible asset using assumptions that are supportable and reasonable, while indicating management’s best estimate about the favourable financials over the intangible asset’s useful life (Oliveira, Rodrigues & Craig, 2010). Therefore, taking into account the fact that IAS 38 includes subjective estimates of the management, which directly pertain the valuation of intangible assets for users of the financial statements, the aspect will be thoroughly investigated in this thesis.
The primary objective behind the application of the IAS was to apply a common framework for the purpose of financial reporting that would result in bringing up high transparency and higher comparability between financial statements of different companies. The application of relevant IAS and the International Financial Reporting Standards (IFRS) provide flexibility to the management of companies to interpret these accounting standards, especially with regards to the intangible assets (Ball, 2006).
It is pertinent to mention that the intangible assets are becoming steadily more and more important in all sorts of businesses. Also, an increasing number of mergers and acquisitions are being carried out all over the world on the basis of the importance of the intangible assets. Furthermore, intangible assets play a vital role in contemporary businesses as many managers opine that intangibles have substituted the fixed or tangible assets to a great extent; while the growth and competitive sustainability of modern companies are increasingly getting dependent upon these assets (Tollington, 2006).
It has also been observed that while companies are assigning greater values to their intangible assets, these are mostly unable to work out the future economic benefits arising out of an intangible asset. This research thus aims to deliver an understanding to the market about this complicated aspect, while highlighting the managements’ accounting decisions for the identification and projecting fundamental economic benefits associated with the intangible assets (Marr, 2008). The research will also provide an insight into the judgements of management which could impact accounting decisions pertaining to the accounting of intangible assets i.e. recognition and valuation.
Keeping the above discussed background in view, the aim, objectives and question of the research will be clearly laid out in the next section.
1.2 Aim & Objectives
(a) Aim of Research
To evaluate how the current accounting standards (IAS 38) for intangible assets apply across different industries, while examining the value relevance of intangible assets and how they affect company value.
(a) Objectives of Research
• To highlight the importance and features of the current accounting standards (IAS 38) for intangible assets.
• To examine the application of the current accounting standards (IAS 38) for intangible assets across different industries.
• To examine the relationship between intangible assets and company value.
• To examine the application of the current accounting standards (IAS 38) for intangible assets and the relationship between intangible assets with company value in two UK based companies i.e. Sage Group PLC and Greenergy.
(c) Research Question
The research question encompasses the evaluation of the application of the current accounting standards (IAS 38) for intangible assets apply across different industries and examining the relationship between intangible assets and company value. Based on the scope of the research question, following sub questions have been identified:
• What is the importance and the features of the current accounting standards (IAS 38) related to intangible assets?
• How the current accounting standards (IAS 38) for intangible assets are applied across different industries?
• What is the relationship between intangible assets and company value?
• What flexibility does a company’s management have to influence the accounting, recognition and valuation of the intangible assets under IAS 38?
• How do contemporary companies report intangibles under IAS 38?
• How can value relevance be measured and which models are being used for measuring value relevance of intangible assets under IAS 38?
After discussing the background of the research subject and laying out its aim, objectives and question, the next chapter will encompass the review of the academic literature in accordance with the important questions identified above.
CHAPTER 2 – LITERATURE REVIEW
In this chapter the academic literature will be reviewed in detail in the aspects of: importance and the features of IAS 38 related to intangible assets; application of IAS 38 for intangible assets across different industries; relationship between intangible assets and company value; flexibility with a company’s management to influence the accounting, recognition and valuation of the intangible assets: reporting of intangible assets by contemporary business organizations; and measurement of value of intangible assets.
2.1 Importance of Intangible Assets & Features of IAS 38 Related to these Assets
IAS 38 has its own manner of interpreting the intangible assets and this interpretation has been evolving over the years as is obvious from Table – 1 below.
Table – 1: Evolution of IAS 38 (Intangible Assets)
Image Courtesy: IAS Plus (2015)
According to Kristandl & Bontis (2007), examples of intangible assets as described in IAS 38 include: spending of valuable resources or taking on liabilities while buying or engaging in research, development or incurring maintenance costs with respect to particular intangible reserves such as technical knowledge or scientific knowledge, design and execution of new systems or processes, academic property, knowledge of market, trademarks and licenses (containing publishing titles and brand names). All these can be condensed as copy rights, software, customers lists, patents, licenses, supplier or customer relationships, motion picture films, share in a particular market, rights of mortgage servicing, franchises, marketing rights and customer loyalty et cetera.
IAS 38 also defines the intangible assets by way of exclusion. For instance, Keong Choong (2008) and Oliveira, Rodrigues & Craig (2010) state that eliminations from the ambit of scope of IAS 38 might be possible if transactions or activities are so particular in nature that they induce issues of accounting that might be dealt in some other way. Mainly these matters occur in the accounting for spending on the discovery for, or improvement/advancement of oil deposits exploration, mineral and gas in extraction industries and also for contracts pertaining to insurance.
As mentioned earlier, intangible assets are also mostly defined as identifiable non-monetary assets without physical substance. Austin (2007) and Paananen & Lin (2009) agree that where a company wishes the recognition of an intangible, it is required to present evidence so as to the characteristics of the asset in the light of IAS 38. However criteria for identification is met when the said intangible asset has the quality of being separable i.e. the asset can easily be separated from the entity and also could be either rented, transferred, sold, exchanged or licensed, in isolation or jointly with a pertaining asset, liability or contract.
The criteria standardized for the identification of an intangible asset can also be met when an intangible incorporates legal or contractual rights by virtue of association, whether the said rights are separable or transferrable. Skinner (2008) states that an organizational entity is said to control an asset if it has the right of obtaining inflow of future economic benefits from the asset and also holds the power of restricting the right of use to others to these inflows. Generally, the capability of controlling an asset is embedded in the enforceable legal rights in a court of law as provided by IAS 38. The law permits a company to have control over the asset in any way it desires and future economic benefits may comprise of either sale proceeds of products or services, cost reduction or other form of benefits arising because of the assets’ use.
IAS 38 also defines the recognition criteria for the intangible assets. Nobes (2006) and Zéghal & Maaloul (2011) mention that according to IAS 38, an intangible shall be recognized if the inflow of future economic benefits as related to the intangible towards the entity is probable and the cost is reliably measureable. Moreover, a company should evaluate likelihood of foreseeable future economic benefits through rational and acceptable assumptions denoting the entity’s best estimate of desirable economic conditions which would be present throughout the estimated useful life of an intangible asset.
2.2 Application of IAS 38 for Intangible Assets across Different Industries
IAS 38 with special reference to the intangible assets applies to all industries and sectors, where it prescribes the accounting treatment for intangible assets, including development costs. However, the interpretation of intangible assets differs across industries owing to the nature of the assets. It is also pertinent to mention that IAS 38 does not apply to intangible assets covered by other IAS. For instance, Cairns (2006) comments that deferred tax assets covered under IAS 12; leases that fall within the purview of IAS 17; goodwill arising on a business combination and dealt with by IAS 22; assets arising from employee benefits that are covered by IAS 19; and financial assets as defined by IAS 32 and covered by IAS 27, 28, 31, and 39; are not covered under IAS 38. Kristandl & Bontis (2007) add that IAS 38 also does not apply to intangible assets arising in insurance companies from contracts with policyholders, nor to mineral rights and the costs of exploration for, or development and extraction of, minerals, oil, natural gas, and similar non-regenerative resources. However, the standard does apply to intangible assets that are used to develop or maintain these activities.
Here the discussion will be limited to only two main sectors that is information technology and energy and power production as case studies being discussed in Chapter – 4 have also been selected from these two sectors. Kim & Lee (2006) and Real, Leal & Roldán (2006) highlight that the scope of intangible assets in the information technology sector encompasses: technological expertise; qualified and professionally competent employees; specialized customers; and corporate value. However, in this sector, the interpretation of intangible assets is a bit complicated owing to the limitations imposed by law. For instance, Corrado, Hulten & Sichel (2009) highlight that as far as software capitalization is concerned, two general rules are applicable i.e. it either belongs to the category of property, plant and equipment or the intangible asset category. The former will be applicable if the software is being used to provide products or services; while the latter is applicable if the software is being used just for routine tasks like inventory management. However, defining the boundary between the two is subjective as in the case of warehouse based businesses where the software is used for inventory management but it also constitutes a major part of the business’s operations. On similar lines, Ghosh & Wu (2007) highlight that software can also be capitalized on the basis of cost as it is categorized under property, plant and equipment if its value exceeds US $100,000.
As far as the energy sector is concerned, the valuation models for contemporary organizations are fast transforming to accommodate the intangible assets, which are not easily recognized by the conventional valuation models. According to Beasley, Pagach & Warr (2008) and Chalmers, Clinch & Godfrey (2008), the scope of intangible assets in this sector is being enhanced to include: cost-efficient quality improvement processes and technologies; information on customer behaviours; investment and productivity matrices; customer capital; human capital; and corporate value.
2.3 Relationship between Intangible Assets & Company Value
Despite the various transformations and the modernization of the contemporary business world, it has been observed that intangible assets still lack their complete incorporation in the financial statements and accounting practices, especially with reference to the contradiction of associated costs with revenues. Allee (2008) and Edvinsson & Malone (2007) agree that companies though acknowledging the importance of the intangible assets do not cater for the requisite detail and attention these assets require in the domain of accounting. This is damaging for the businesses as often these intangible assets are the key drivers to future economic benefits and thus deprive the companies of a possibility for enhanced value.
Investment is yet another area applicable to the intangible assets in the contemporary business world. In this context Gardberg & Fombrun (2006) and Marrano & Haskel (2006) opine that investments in the intangible assets are made to strengthen the values and the competitive position of the firms. This would indicate the association between investments in intangible assets and company’s market values to conclude the applicability of capitalized intangibles. This investment is visible more in the knowledge-based sectors and industries like information technology and even services but lesser in the manufacturing sector.
It is clear from the above discussion that the position of the firm and in particular the financial position and viable position of the company will be adversely affected if a company fails to appropriately capitalize investment in intangibles. Dischinger & Riedel (2011) comment that if these assets are understated in the financial statements, the users of these statements will be lacking the value and worth of a business’s equity and its potential and ability to create value in the future. This lack of understanding will not only deprive a business of requisite funding and investment but will also result in investors being attracted by companies with less or no intangible assets, considering that on a short-term basis the reported earnings levels and book values will be higher.
On the other hand there is the fact that the modern business world gradually comprehends the fact that market positioning and customer awareness are the basic ingredients for businesses regardless of their sector or size. Awano Et al. (2010) comment that in modern businesses, intangible assets like intellectual property, knowledge base, relationships and employee quality, constitute a far larger portion of the business value than the tangible assets like property, plants and equipment. These businesses also acknowledge the fact that the development and efficient management of intangible assets has the potential to lead the business to long-term success.
Substantiating above, Aaker (2012) states that for todays’ businesses loyal customer base and strong brands have assumed the status of important assets. These intangible assets are equally important as trademarks and copyrights, which are essential for a firm’s competitiveness in face of its rivals. Further, Aaker (2012) adds that a business’s reputation and standing, favourable or advantageous location, its long-term associations and contracts, and goodwill are also important intangible assets which create value for the business and lead to productivity and profitability. The relationship between goodwill and intangible assets is presented in Figure – 1 below.
Figure – 1: Relationship between Goodwill and Intangible Assets
Image Courtesy: Krstić & Đorđević (2010)
2.4 Reporting of Intangible Assets by Contemporary Companies
The contemporary business world is characterised by an inborn need for information which is considered essential for decision making. In this context, Boekestein (2006) and Oliveira, Rodrigues & Craig (2010) highlight that the need for detailed information is interest driven where all contenders want to know everything about a venture prior to investment or establishment of any meaningful relationship. With regards to this specific need, the financial statements are the primary instrument to provide information on: liabilities, tangible and intangible assets, changes in capital, cash flows, potential of generating profit and the business value and worth. Here, intangible assets are of principal importance as according to Oliveira, Rodrigues & Craig (2010), these assets if not accompanied by detailed and appropriate information in the financial statements, preclude the possibility of stakeholders to judge the true worth of a business and also hinders their decision making.
There are also a few problems associated with the valuation and reporting of intangible assets by contemporary firms. For instance, Penman (2007) and Abeysekera (2006) agree that if the intangible assets are measured and recognised too rigidly, the book value of the company falls far below its market value. This has been especially observed in the technology and knowledge intensive companies. In this context Krstić & Đorđević (2010) highlight that where companies follow the framework presented in Figure – 2 below, these issues and problems are normally addressed efficiently.
Figure – 2: Framework for Reporting Enterprise Value
Image Courtesy: Krstić & Đorđević (2010)
Similarly, Krstić & Đorđević (2010) also mention that in order to address the issues and problems related with the reporting and valuation of intangible assets, some guidelines have been introduced in Europe (Table – 2 below).
Table – 2: Guidelines for Reporting & Valuation of Intangible Assets
Image Courtesy: Krstić & Đorđević (2010)
Substantiating above, Ball (2006) and Chalmers, Clinch & Godfrey (2008) opine that since 1995 onwards i.e. with the emergence and growth of the information technology sector, intangible assets have assumed an added importance and accounting practices have been reassessed to create new frameworks for the valuation and recognition of the intangible assets. In 1998 the IAS 38 was adopted which can be termed as considerable progress towards the elimination of limitations associated with conventional accounting practices with reference to the intangible assets. The standard provides relevant information on the criterion for recognition, measurement of value, disclosures and treatment of the intangible assets.
In addition to above, Matolcsy & Wyatt (2006) are of the view that intangible assets in general and the internally generated intangible assets in particular, if recognised under strict criteria, will render their coverage beyond the scope of IAS 38 and may also exclude these assets from the financial reports. The author claims that this has been the principal reason behind introduction of a voluntary submission of financial statements on intellectual assets or the intangible assets. However, the same has not been found confirmed from any other source.
2.5 Measuring of Value of Intangible Assets
With respect to the valuation of an asset and in the light of IAS 38, intangible assets are initially stated at costs. According to Cairns Et al. (2011), for certain transactions, valuation of an intangible asset at costs is quite uncomplicated. When intangible assets are separately acquired, the costs incurred are the purchase price and directly attributable costs. However, when an intangible is attained as a result of a business combination, the reporting value is the pertaining fair value at the date of procurement of the related intangible asset.
In addition to above, Cairns Et al. (2011) state that there are several different methods available to evaluate an intangible asset’s fair value as a result of business combinations. In general, these methods as laid out by IAS 38 include: quoted market prices, recent transactions for similar assets, specific developed techniques for value estimation and projected future cash flows.
Based on the research performed by Lhaopadchan (2010), it can be noted that quoted market prices are rarely available for intangible assets and that the estimated future cash flows method is often used for determination of fair values of intangible assets in practice. Hence, the market prices quoted present the most reliable fair value estimation methodology for an intangible asset as the properly applicable price in the market is generally the recent price of bid. However, if recent bid prices cannot be gathered i.e. the unavailability of market prices; the latest price of analogous pertinent transaction may present a foundation for fair value estimation, in case no significant other changes have occurred. Where there exists no active market, the fair value of the concerned asset shall be the amount that would have been paid for the said asset, in a transaction of arm’s length, at acquisition date, between informed and desiring parties, pertaining to the best valuable information. Therefore, Lhaopadchan (2010) recommends that an entity for the purpose of determination of this amount, should take into account the results of up-to-date transactions for alike intangible assets.
When intangible items are reported as an asset, the measurement after recognition also needs to be examined. For instance, Lantto & Sahlström (2009) state that IAS 38 specifies two models that a company can apply for the purpose of measuring an intangible after its recognition as an asset i.e. the revaluation model or the cost model. In the revaluation model, the asset is required to be reported at a re-valued amount after initial recognition. In this way, the re-valued amount is the fair value at the revaluation date after excluding (deducting) any consequent accumulated amortization and any consequent accumulated losses of impairment. For this model it is significant that the re-valued fair value is ascertained from an active market. Also it is important at the date of balance sheet the asset’s carrying amount does not significantly vary from the asset’s fair value, which must be reached by regular revaluations. However, Sahut, Boulerne & Teulon (2011) contend that the requirement associated with this model results in the fact that most of the intangible assets cannot be measured using the revaluation model. The reason for this is that the markets for intangible assets are missing, because of the unique nature of intangibles, and the fair value of concerned assets cannot be determined reliably. On the other hand, the cost model demands an intangible to be recognized at cost after deducting accumulated amortization (if any) and accumulated losses of impairment (if any).
2.6 Flexibility with Management to Influence the Accounting, Recognition & Valuation of Intangible Assets
As mentioned earlier, IAS 38 provides flexibility to the management to influence the recognition and valuation of intangible assets. The management’s prejudice in evaluating fair values of intangibles is primarily mentioned by IAS 38 as recognition criteria. According to Capkun Et al. (2008), the preliminary criteria for recognition of an intangible asset include: probable inflow of economic future benefits to the entity; and costs of given intangible can be reliably measureable. Further, as regards probability of future economic benefits inflow, standards states that an entity shall assess the probability of projected future economic benefits using reasonable and supportable assumptions that represents management’s best estimate of the set of economic conditions that will exist over the useful life of an asset. This statement assumes that management has the opportunity to influence the expected future economic benefit and also the decision whether the entity should recognize an intangible asset or not.
Measurement of an intangible asset after initial recognition also falls under the subjectivity of management pertaining to the valuation of intangible asset. Goodwin & Ahmed (2006) and Herrmann, Saudagaran & Thomas (2006) opine that by choosing the application of either the cost model or the revaluation model, the management can influence for example the company’s earnings, as the cost model demands an intangible to be reported at cost after deducting accumulated amortization (if any) and accumulated losses of impairment (if any). The revaluation model dictates, after preliminary recognition, an intangible to be reported at an amount revaluated (fair value) at the date of revaluation after deducting any consequent accumulated amortizations and any consequent accumulated loss of impairment.
After carrying out the review of academic literature in accordance with the research questions identified in Chapter – 1, the next chapter will highlight the research methodology.
CHAPTER 3 – METHODOLOGY
3.1 Introduction
In this chapter the research methodology will be highlighted in addition to the introduction of organizations selected as case studies. The important areas of discussion will include: details of companies; research design; secondary research data; quantitative and qualitative approach; the case study approach; and limiting factors.
3.2 Details of the Organisations
As mentioned in Chapter –1, two UK based companies have been selected as case studies from two different sectors that are information technology and energy. From the information technology sector, Sage Group plc, UK has been selected while from the energy sector Greenergy, UK has been chosen.
The Sage Group plc is based in UK and provides business management services and software to small to medium sized businesses. The company’s services include payroll and accounting; enterprise resource planning; customer relationship management and payments. The company also provides consultancy services to its numerous customers in terms of expert and professional support with reference to various business issues (Reuters, 2015).
On the other hand, Greenergy is one of the largest providers of transport fuel in UK and enjoys with service and infrastructure capability. The important customers of the company include: fuel resellers; independent forecourt operators; logistics companies; transport fleet operators; supermarkets and oil companies. The company has recently developed modern fuel manufacturing facilities in Teesside and on the Thames estuary; carried out renovation of fuel storage terminals in Cardiff and Plymouth; and is at present converting two former refineries into import terminals (Greenergy, 2015).
3.3 Research Design
This study is based upon the qualitative research methodology, which can greatly vary in accordance with the dictates of the nature of the research subject. The variation can manifest in terms of suppositions, approaches, processes and deliberations. However, regardless of the dictates of the subject of research, the nature of study will follow naturalism, interactivism, humanism, emergence and interpretivism (Marshall & Rossman, 1999). Naturalism in case of this study arises from the fact that the two organizations selected as case study are both operating in the contemporary business world and are practicing modern accounting methodologies. The interactivism relates to the fact that it takes into account the perspectives of both the directives that is IAS 38 and the followers of these directives i.e. the companies. This research is also considered humanistic in nature owing to the fact that the subjectivity of the managers while deciding the recognition, treatment and valuation of the intangible assets is being analysed as an important factor. This research is also considered emergent because it is aimed at studying one of the most important contemporary accounting issues i.e. treatment and valuation of the intangible assets. The research is also considered to be interpretive because it aims at the correct interpretation of the IAS 38 towards the treatment and valuation of the intangible assets.
3.4 Secondary Research Data
As mentioned earlier, this research is qualitative in nature with an emphasis on secondary sources of data. It is pertinent to mention that both primary and secondary kinds of research can be either qualitative or quantitative in nature. When the primary research is carried out in either the quantitative or qualitative form, critical questions are drafted and answered with the help of surveys, tests and experiments. However, when…
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