A comparative analysis of intangible assets in LSE- and NGX-listed companies

Abstract

Intangible assets (IAs) are increasingly important in modern business. Accordingly, their accounting treatment and disclosure are equally important. Despite this, the accounting standard dealing with IAs has not been substantively revised in decades. The International Accounting Standards Board (IASB) acknowledges this deficiency and is currently working on a project to comprehensively review IA accounting. This thesis contributes to the IASB’s project by examining the disclosure, recognition, and measurement of IAs among companies listed on the London Stock Exchange (LSE) and the Nigerian Stock Exchange (NGX) in 2013 and 2023. The study explores the disparities in IA practices between developed and developing economies, focusing on recognised IAs (RIAs) and unrecognised IAs (UIAs). In doing so, the study provides empirical evidence about the extent, type and disclosure of RIAs and UIAs in a developed and developing economy. The thesis uses a quantitative content analysis of LSE and NGX companies’ 2013 and 2023 financial statements. Findings reveal that both LSE- and NGX-listed companies exclusively use the cost model for IA measurement, suggesting that the restrictions imposed by IAS 38 before the revaluation model can be adopted is very limiting. LSE-listed companies exhibit a more structured and compliance- driven approach to IA reporting, with goodwill being the most frequently disclosed RIA. In contrast, NGX-listed companies disclose fewer RIAs but report UIAs more extensively, particularly in relation to brand-building expenditures. This appears to be driven by regulatory challenges and a lack of expertise in RIAs recognition. The research recommends that the IASB reduce the restrictions on the use of the revaluation model for IAs. In addition, it should consider adopting standardised IA classifications and mandate the disclosure of useful UIAs. Finally, industry-specific guidance and tools for emerging economies would be helpful to improve IA reporting.