The approach to accounting for intangibles raises some issues because:

Question

Quizplus · Accepted Answer

The approach to accounting for intangibles may not recognise many intangible assets, particularly those that are internally generated. This is because it can be challenging to measure the fair value of internally generated intangible assets. Therefore, entities may choose not to recognise them as assets, which leads to issues in accounting for intangibles.

Other choices mentioned in the options have some validity too. Option A is also correct, as assets are now subject to impairment testing, which takes away the professional judgment required for amortisation. Option B is not correct because consistency in the accounting treatment of R&D expenses does not mean entities cannot claim to have expended resources on potential benefits. Option D is not entirely correct. Suppose there is an active market for a particular type of intangible asset. In that case, the active market criteria for determining the fair value of the asset may be appropriate. However, in cases where there is no active market, determining the fair value can be challenging and result in overstatement of asset values.

The Approach to Accounting for Intangibles Raises Some Issues Because