Conceptual Accounting Framework and the Accounting Standard 138

Question: The Conceptual Framework 2010 Indicates that Expenditure on Intangibles that meets the definition of, and recognition Criteria for, assets should be capitalised. However, AASB 138 Specifically Prohibits the recognition of Internally developed brands, Mastheads, Publishing titles, Customer lists and Similar items. Do you think these views are in Conflict? Explain your response and give possible reasons. Answer: The conceptual accounting framework provides that the internally generated intangible assets should be capitalized if certain criterias are full filled. The ASSB 138 deals with intangible assets. The AASB 138 in Para 8 provides the meaning of an intangible assets. It states that an identifiable non-monetary asset that does not have physical substance is referred to as the Intangible Assets. The para 21 of the standard states that an intangible assets can be recognized if the it is probable that there will be expected future economic benefit from the assets and the cost of assets can be measured with reliability (Steenkamp et al., 2016). The Para 48 of the AASB 138 clearly provides that the internally generated goodwill shall not be recognized. However, in Para 51 of the standard it is stated that intangible assets can be recognized if in addition with the general requirement some additional requirements provided in Para 52 to Para 57 are full filled. Therefore it can be said that the re is no conflict between the Conceptual accounting framework of 2010 and the accounting standard 138. The AASB 138 prohibits recognition of internally generated goodwill because it is difficult to assess whether an internally generated goodwill qualifies for recognition (Hu et al., 2015). The problems are given below: It is difficult to identify completely an internally generated asset. It is difficult to determine whether the identifiable internally generated intangible assets will result in future economic benefit. It is very to determine the cost of such assets because in most cases the costs are not separately marinated. Reference Hu, F., Percy, M., Yao, D. (2015). Asset revaluations and earnings management: Evidence from Australian companies.Corporate Ownership and Control,13(1), 930-939. Steenkamp, N., Steenkamp, N., Steenkamp, S., Steenkamp, S. (2016). AASB 138: catalyst for managerial decisions reducing RD spending?.Journal of Financial Reporting and Accounting,14(1), 116-130.