whitepaper: Implications of the new international accounting standards for IP owners

On 31 March 2004 the International Accounting Standards Board (IASB) issued IFRS 3 “Business Combinations” (replacing IAS 22 “Business Combinations”). Accompanying revisions were also made to IAS 36 “Impairment of Assets” and IAS 38 “Intangible Assets”. Although differences remain, the new standards in this area achieve a high degree of convergence with US GAAP. FAS 141 “Business Combinations” and FAS 142 “Goodwill and Other Intangible Assets” in the US have already had important implications for brand owners and the way trademarks are valued and accounted for. For the first time, trademarks and other acquired intangibles had to be separately recognised on the balance sheet.

IFRS 3 also requires identifiable assets to be recognised on the balance sheet of the acquiring entity, provided that certain conditions are met. This is a significant change from most existing (non-US) national accounting standards. These and other significant new disclosures in respect of the cost of acquisition and the main classes of assets and liabilities will mean greater transparency and will require a much more detailed due diligence process.