Accounting of intangibles under IFRS - A comparative study of Sweden and Australia

Abstract

Background: In 2002, both Sweden and Australia announced that they would to adopt the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), for reporting periods beginning on or after 1 January 2005. Prior to the execution of a single set of standards in 2005, the two countries had different accounting traditions. Within the IFRS one standard has been frequently discussed namely “IAS 38- intangible asset”. This standard altered the accounting practice heavily for both Sweden and Australia. Purpose: The purpose of this study is to examine how biotechnology companies, in Sweden and Australia, account for intangible assets after the implementation, and if possible, to explain why they do things the way they do. Delimitations: In order to find a graspable study, the study set outs its focuses on the biotech industry solemnly, due to the industry’s general high content of intangible asset. The study does not intend to answer the wide-ranging question if IFRS has harmonized the complete accounting system. Neither will it try to evaluate the IFRS regulation, nor will it assess the different valuations methods available for valuation of intangibles. Methodology: The study is of an abductive nature and consists of a quantitative, as well as a qualitative approach. These two approaches are represented by an examination of financial reports and interviews with accounting experts from a selected amount of companies. Conclusions: The study concludes that there are differences to be found between the two countries. Swedish biotech companies generally have more intangible assets in relation to total asset on their balance sheet. This goes especially for capitalized research and development, where the largest difference has been located, both in the examination of annual reports, as well as on the answers from the interviews.