ISSN 2434-2459

ISS Research Series No. 3

AGISSS
Gakushuin University
February ����National Differencesin the Disclosure of Intangible Assets in IFRS
Clemence GARCIA

Association of Gakushuin International Social Sciences Studies
�- �- � Mejiro, Toshima-ku, Tokyo ���- ���� JAPANNational Differencesin the Disclosure of Intangible Assets in IFRS
February 2022

Clemence Garcia
Gakushuin University

Abstract
This survey focuses on the national differences in reporting intangible assets inInternational Financial Reporting Standards (IFRS). Based on hand-collected data andnarrative financial information, it presents and compares the main characteristics ofintangibles from a sample of 280 pharmaceutical companies over the period 2013–2017.
Most companies disclose intangibles typically in the notes, with some variations
depending on the country. Conversely, “big pharma” companies, especially European
ones, disclose intangibles by function because they are too many to be reported by nature.
Disclosure by function also indicates the riskiness of intangibles.
These findings suggest that some national features have survived IFRS adoption, and thatthe disclosure of intangibles could benefit from further standardization based onfunctional classifications.
Keywords: Intangibles, Goodwill, IFRS, Pharmaceutical Companies, Accounting
Harmonization

1.

Introduction

Accounting for intangible assets was controversial since the beginning of the 20th century(Garcia et al., 2018). The issues regarding recognition and subsequent measurement haveremained unsolved (Lev, 2019). In 2016, the Financial Accounting Standards Board(FASB) has re-launched a “Project on Identifiable Intangible Assets and Subsequent
Accounting for Goodwill.” In 2021, the European Financial Reporting Advisory Group(EFRAG) published a discussion paper in which recognition and disclosure of intangibles
are subject to reconsideration even much further than the FASB project (EFRAG, 2021).
1

This survey focuses on discretionary disclosure choices made by companies, like howintangibles are classified in the notes. The purpose is to benchmark existing practices andidentify some possible improvements. IFRS is principle-based; hence, the interpretationof standards plays a major role. Additionally, IAS 38, which is about intangible assets,
does not provide for a limitative list of intangible assets for disclosure. Because of theseflexible guidelines, accounting practices vary greatly among businesses and countries(Garcia & Itabashi, 2020). In this survey, we will further investigate the national
differences among companies, either in the underlying business model of companies orin the disclosure practice per se.
The remainder of this paper is organized as follows. Section 2 provides an overview of
the relevant accounting standards. Section 3 explains the research design. Section 4 gives
a global summary of the results. Section 5 analyses country-specific features. Finally,
Section 6 is the conclusion.

2.

Normative Framework in IFRS

2.1．Definition and recognition
The definition of intangible assets varied greatly over the 20th century. This study adopts
the current definition in IAS 38.8 because it corresponds to the scope of our research: An
intangible asset is an identifiable non-monetary asset without physical substance.
For our research, we must highlight two aspects: “identifiability” (IAS 38.11) andrecognition (IAS 38.21):
An asset is identifiable if it either(a)is separable, that is, capable of being separated or divided from the entity andsold, transferred, licensed, rented or exchanged, either individually or together with arelated contract, identifiable asset or liability, regardless of whether the entity intends to
do so; or(b)arises from contractual or other legal rights, regardless of whether those rights
are transferable or separable from the entity or from other rights and obligations.
The types of intangible that can be recognized have no limitation; therefore, several
elements for the same activity can be distinguished. For example, some pharmacompanies in our sample recognized customer lists, brands, and distribution rights for thesame activity. Others recognize fewer elements.
2

Next, recognition implies that intangible assets meet the underlying definition of assets,
which excludes deferred assets like start-up costs and advertising expenses. Most of thearguments raised by Lev (2019) in favor of capitalizing research and development
investments appear to be limited by the definition of assets rather than the specificaccounting standard for intangible assets.
IAS 38.21 provides some recognition criteria:
An intangible asset should be recognized if, and only if:(a)
It is probable that the expected future economic benefits that are attributable tothe asset will flow to the entity, and(b)
The cost of the asset can be measured reliably.
These two requirements tend to reduce intangible assets recognition drastically.
Concerning (a), in the future flows of economic benefits, the uncertainty of the investment
outcome cannot be denied. This results in a wide range of interpretation concerning thevalue of separable intangible assets, especially regarding R&D intangibles. Concerning(b), reliability is better accepted for purchased intangibles than internally generated ones.
The reason here is more practical because the development costs that meet IAS 38 criteria
are difficult to be distinguished from other costs that do not.
As far as goodwill and intangible assets acquired from a business combination areconcerned, IFRS 3. 10 provides the following.
As of the acquisition date, the acquirer shall recognize, separately from goodwill, theidentifiable assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree.
This provision implies that the initial recognition of intangible assets, in this case, resultsfrom the purchase price allocation. In other words, amounts allocated to separate
intangibles are recognized alternatively to other assets purchased and goodwill. To someextent, some discretionary choices may occur at the level of recognition from M&As.
2.2.Disclosure
IFRS do not provide a formal standard for disclosure. Some interesting initiatives like the
WICI Framework (WICI, 2016) and some examples of intangible assets provided in IFRS
3 may provide a first idea for preparers, but they are not binding.
Another important point to highlight here is that the categories of intangibles used fordisclosure are not always equivalent to those used for recognition. Some companies have3

too many intangibles to disclose, and the items are grouped in categories like “marketingand brands,” “product-related intangibles,” and other generic labels. We will provide
more details about disclosure policies in the findings.

3.

Research Design

3.2. Objective and research question
In a pre-IFRS world, separate intangible assets were defined very differently among
countries (Stolowy & Jeny, 2001). In most countries, intangibles were based on a limited
list of items with a precise accounting treatment for each category. In IFRS, companies
are granted more flexibility in recognizing intangibles; they can create their own
categories. This research intends to survey discretionary choices regarding intangible
disclosure and compare country-specific trends in these choices.
The survey also provides evidence about how IFRS standards have been implemented infinancial reports. It is not intended to demonstrate the value relevance of information
disclosed, nor the determinants of disclosure, but just to document existing practices.
Regarding the scope of this study, a first important aspect was raised in prior literature by
the proposal made by Tweedie and Blanchet (1989) to recognize more separate
intangibles and less goodwill. From prior research (Garcia & Itabashi, 2020), it seems
that companies have eventually followed this direction, and the diversity of separate
intangibles must be further investigated in practice.
The second proposal in prior literature concerns the recognition of internally generated
intangible assets. Lev (2001, 2019) argued for their recognition on the balance sheet,
whereas Skinner (2008) claimed that financial markets were able to identify innovative
firms without such information. In IFRS, companies must capitalize on development
costs, but in practice, intangible-intensive companies are reluctant to capitalize these costs.
This survey provides more details about the type of cost and the circumstances ofcapitalization in pharmaceutical companies.
3.3.Research Method
The research method consists of a descriptive survey of information published bypharmaceutical companies. Our data are from hand-collected information of publicly
available reports issued by pharmaceutical companies. We focus primarily on the
categories of intangible assets disclosed in financial statements’ notes. Moreover, we use
4qualitative explanations from other parts of financial reports as complementary
information.
The original sample is composed of the 300 largest pharmaceutical companies using
IFRS in 2017. From that list, we collected the financial reports of 280 companies from
the Mergent database. We used both quantitative data and descriptions of intangibles andM&As. In some cases, we also used the management report and the description of risks.
Table 1 describes the total sample of 280 companies, which was divided dependingon the parent’s incorporation country. The parent was reassigned based on the main
country of operations for a handful of Asian companies located in tax havens (Bermuda
and Cayman Island). Moreover, pharmaceutical companies from the US do disclose theirfinancial statements in IFRS. Hence, they are excluded in this survey.
For simplicity, countries with similar characteristics and geographical proximity weregrouped as follows:-

European countries include the EU, the UK, and Switzerland;-

Australia and New Zealand are presented together;-

Other countries include Southern America, the Middle East, India, Russia, andAfrican companies.

Table 1 Observations per Country.
Number of observations
2013
2014
2015
European Countries
102
113
122
China
24
25
33
Taiwan26
28
30
Malaysia
6
7
8
Japan
4
5
6
Australia & New Zealand28
29
31
Canada8
1117
Other Countries
12
12
15
Total
210
230
262

2016
123
34
30
8
6
32
22
18
273

2017
124
34
30
8
6
33
25
19
279

The number of observations varies between 2013 and 2017 because of the availability offinancial reports. Additionally, some reports available only in local languages could not
be fully translated, and they are not included in Table 1.
5

4.

Overview of disclosure practices

4.1. Qualitative material
Information Collected
Despite the great number of cases, the information must be gathered comprehensively to
document how companies disclose intangible assets. Quantitative and qualitative
information was collected from different parts of the reports:-

Total intangibles and/or goodwill are disclosed on the balance sheet;-

A quantitative breakout of intangibles is usually disclosed in the notes to thebalance sheet;-

A quantitative explanation of intangibles acquired in specific M&A transactions issometimes disclosed in the notes;-

A quantitative assessment of impairment losses on intangibles, when applicable,
is usually disclosed in the notes;-

Narrative information about accounting policies, including the treatment ofdevelopment costs and amortization policy is usually disclosed in the notes;-

Narrative information about impairment tests, acquisitions and disposals of
intangibles is usually disclosed in the notes, including the value of their mostprominent trademarks;-

Narrative information about business strategy and how some intangibles
contribute to operations in the management report;-

Narrative information about legal procedures and trials involving intangibles in
the risk assessment chapter of financial reports; and-Voluntary disclosure about intangibles can be found in sustainability reports andintegrated reports.

This survey covered many cases: a total of 1,254 observations, 251 per year, on average.
The findings are presented here generally for clarity and conciseness. Further research
may use a more in-depth, case study approach to the phenomena investigated in thisresearch; however, this is beyond the scope of this article.
Pre-Analysis of intangible assets
6After collecting the net values of intangible assets from the notes to financial
statements, we found diverse categories used by companies. Additionally, mostcompanies changed the labeling of categories during the period. In some cases, they also
reclassified as intangible assets from one category to another. For example, a license could
be classified as “intellectual property rights” at the beginning of the period and laterreclassified as “customer-related intangibles.” Based on companies' reclassifications andre-labeling of categories, they were reorganized into the following six categories:
1. Goodwill: This category corresponds to goodwill acquired from M&As.
2. R&D: This category includes both internally generated and in processdevelopment costs. It also includes the contractual payments made in the frameof a joint R&D agreement with a third party.
3. Marketing: This category includes all assets related to customers anddistribution, including brands, licenses, customer lists, and exclusive
distribution contracts.
4. Scientific: This category includes patents, technical medicine files, know-how,and other intellectual property related to the scientific characteristics of
medicine.
5. Information System: This category includes software, information systeminfrastructure and assets related to telecommunication.
6. Others: This category mainly includes some leasehold rights, concessions,agricultural intangible rights that are not intrinsically related to thepharmaceutical business.
In the current state of corporate disclosure documented in this study, these six categories
overlap. Additionally, the labeling of intangibles in the notes is different from the nameof intangibles recognized because companies tend to group intangibles by function rather
than by nature. This aspect will be investigated further in country-specific features infra.

4.2. Quantitative Evolution of Intangible Assets
In 2017, intangible assets were 40.09% of total assets for the sample. Although themagnitude of intangible assets is obvious, this percentage hides great diversity amongfirms. The highest amount can be found in Sanofi (France) with 63,975 million dollars,7whereas the highest percentage is disclosed by Osmia (Sweden) with 86.87% of assets.
On the opposite extreme, large Chinese companies tend to report very low amounts ofintangibles.
Between the two extremes, the magnitude and diversity of intangible assets do not seemto follow the common-sense assumption that larger companies report higher percentagesof intangibles. From narrative information in the notes to the financial statements, thefollowing aspects are often mentioned when explaining the role and magnitude ofintangibles reported:-

Business model (branded medicine versus generics, or specific businesses likebiotech)-Business combinations-

Existence of some specific legal authorizations, which are mostly described assome country-specific circumstances (e.g., cannabis in Canada).

Figure 1. Intangible Assets
OthersIT
R&D
ScientificMarketing
Goodwill
0

50000
2017

1000002016

1500002015

2000002014

2500003000002013

From 2013 to 2017, the global number of intangibles reported increased by 23% (seeTable 2 infra). Meanwhile, the number of companies included in the sample increased
from 210 to 279, resulting in a lower average per company. This is because some large
pharmaceutical companies from China and other developing countries join the sample in
the later years. As we will explain in the findings, these companies report very low
intangibles.
8

Table 2. Evolution of Intangibles.
Information

Marketing

ScientificIntangibles

Intangibles

213695170269

16320

9278

1919

9490

420972230228431

195511

15802 10313

2306

11615

4639772015

262

241201

20037016782 15036

3233

13776

4903982016273

246742203761

19787 15129

4735

9409

4995642017279

246459218746

18866 16263

5162

9613

515108MillionNumber ofdollars

Companies

2013

210

2014

Goodwill

R&D

Systems

OthersTotal

In proportion, goodwill is the largest category of intangibles, with a percentage decreasingfrom 50.52% in 2013 to 47.66% in 2017 (Table 3). The second important item ismarketing intangibles, raising from 40.25% to 42.30% over the period. Interestingly, thedecline of goodwill coincides with the increase in marketing intangibles. The remaining
10% consist of scientific intangibles, R&D, information systems, and other items.
For a survey of pharmaceutical companies, marketing intangibles are surprisingly muchgreater than scientific intangibles. Despite the innovation being the core business of thepharmaceutical industry, intangible investments incurred to pursue research and protect
intellectual property are not reported, at least in quantitative indicators.
These results reveal a distortion of the “smile curve” of the value chain, representing
higher value creation at the beginning and at the end of the business process (WIPO,
2017). In financial reports, marketing intangibles, the assets related to the end of theprocess are reported for high values. In contrast, R&D and scientific intangibles, that areat the very beginning, are not reported or very understated.

Table 3. Proportion of Intangibles.
Goodwill

Marketing

Scientific

R&D

IT

Others2013

50.52%

40.25%

3.86%

2.19%

0.45%

2.24%

2014

49.02%

41.96%

3.39%

2.21%

0.49%

2.49%

2015

48.98%

40.69%

3.41%

3.05%

0.66%

2.80%

2016

49.19%

40.62%

3.94%

3.02%

0.94%

1.88%

2017

47.66%

42.30%

3.65%

3.14%

1.00%

1.86%

9

An aspect that deserves clarification in Table 3 is the low percentage of R&D intangibles.
In financial reports, many companies do not differentiate internal development costs fromin-process R&D costs, acquired from an M&A. From other narrative information in thenotes, it can be understood that these R&D costs are almost exclusively purchased ones.
Most frequently, these costs are in-process R&D, sometimes payments incurred in R&D
outsourcing contracts or joint R&D projects. In the pharmaceutical industry, only aminority of companies capitalized their internal developments costs explicitly.

5.

Country-specific features of disclosure

5.1. European Countries: EU, UK, and Switzerland
The European subsample consists of 124 pharmaceutical companies, with great
diversity of size and specializations. Indeed, this is the subsample that includes most “Big
Pharma” companies: seven of the ten largest observations in this study are from Europe,
the remaining three are from Japan. Nevertheless, most companies are middle-sized, oftenfamily companies that have kept a strong national focus.

Figure 2. Europe
350000

million USD

30000025000020000015000010000050000
0Goodwill

2013
R&D

2014
IT

2015

Marketing2016
Scientific

2017
Others“Big Pharma” companies like Novartis, Sanofi, Bayer, Roche, Glaxo Smith Kline andAstraZeneca are much larger than other companies. Consequently, Sanofi, Novartis, and10

Bayer, the three companies that disclose the highest intangible amounts, report more thanhalf of the total intangibles for this subsample.
In terms of disclosure, large companies provide much more details about theirintangibles than smaller firms. Some reasons are explicit from the information itself: morebusiness acquisitions, more research sharing agreements with third parties, and moreintangible assets are disclosed.
The smaller cases (about 2/3 of the subsample) use a classification by nature whendisclosing quantitative information in the notes. Concretely, various categories of assets,such as goodwill, patents, trademarks, and software, are disclosed based on the categories
recognized in the accounts. Relatively few items are reported—typically just two or
three—so that it is easy for the reader to identify changes, disposals, and new investments.
However, the labeling of intangibles is very diverse, which may be harmful in terms ofcomparability.
For larger cases, approximately the ones that are in the top fifty largest companies
worldwide, separate intangible assets are disclosed based on their function. In other words,
the categories recognized in the accounts, like patents, licenses, and brands, arereclassified into broader categories that reflect the purpose of intangible investments. For
example, Bayer, in the annual reports 2013–2017, used the following categories: “patents
and technologies,” “marketing and distribution rights,” “production rights,” “R&D
projects,” and indeed “goodwill.”
From the quantity of information about intangibles in the narrative parts of financial
reports, intangibles are apparently numerous and cannot be disclosed separately. On topof this practical reason, the disclosure of intangibles by function is an interesting policy
because the function of intangible assets indicates their importance in the business andtheir risks.
For example, “marketing and distribution rights” are at the end of the business cycle,
the closest stage to profit realization. In contrast, “R&D projects” are investments
incurred at the beginning of the cycle, which can last several decades in thepharmaceutical industry. This is particularly true for in-process R&D, the costs
recognized from business acquisitions. Although R&D and patents are undoubtedly thecore business of most pharmaceutical companies, the value of intangible assets related toearlier stages of development tends to be understated because of uncertainty regarding
the outcome of product development.
11

In the European subsample, the weight of marketing intangibles (42% of intangibles)
contrasts with scientific assets (3%) and R&D costs (4%), most of which are acquired
R&D programs. Marketing intangibles included traditional, registered legal rights (e.g.,
trademarks and licenses), and non-registered intangible assets (e.g., customer relations
and customer lists).
Notably, some companies disclosed amortizable intangibles separately from thosewith indefinite useful life. In the case of Glaxo Smith Kline, annual reports 2013–2017,brands were separated into two groups, depending on their useful life. This is not aclassification by function; however, a classification based on the accounting treatment
also provides an indication of risk. Concretely, amortized intangible assets are consideredless risky because their acquisition cost is systematically allocated over the period of use.
In contrast, permanent retention of intangibles is often criticized for the risk ofoverstatement of assets.
The disclosure of intangibles depending on whether their useful life is finite or infinite
appears in a small minority of cases. In the context of economic uncertainty, providing
accurate information about measurement is an interesting way to highlight the risks
associated with changes in the value of these intangibles.

5.2. Extra-European Anglo-Saxon Countries: Canada, Australia, and New ZealandAustralia and New ZealandIn this subsample, companies from Australia and New Zealand are presented together
because their characteristics are relatively similar. The largest of the 33 companies
documented is CSL, an Australian biotech specialist. All other cases are much smaller
companies, so that the magnitude of data gathered in Figure 3 is completely different fromthe European sample.

12

Figure 3. Australia and New Zealand
7000

million USD

6000
5000
4000
3000
2000
1000
0

2013
Goodwill

R&D

2014

2015

2016

IT

Marketing

Scientific

2017
OthersIn the subsample, disclosure about intangible assets is diverse, but globally less detailed
than in the European subsample. Several companies, including CSL, disclose separate
intangibles as “intellectual property.” The notes and elsewhere in the financial reports
provide more evidence on the precise nature of these intangibles, and some descriptionsof products and innovations.
In the categories of Figure 3, “intellectual property” was classified as scientificintangibles because there was no evidence that the company relied on marketing
intangibles elsewhere, and because the narratives focused on scientific aspects of theirbusiness. However, the accuracy of this classification is not evidenced, and informationis scarce from a user’s perspective.
Contrasting with the “intellectual property” item, some classifications by nature can beseen in other cases. For example, Asaleo (annual reports 2013–2017) used the categories
goodwill and brands. Blackmores (annual reports 2013–2017) disclosed trademarks,
capitalized website development, registrations, brands, formulations, patents, royalty
stream. These reporting practices are close to the European middle-size cases. However,Blackmores shares the same particularity with Glaxo Smith Kline: the useful life andamortization periods are mentioned for each category.
Regarding internally generated intangibles, several companies used the “developments
costs” category, in which the costs were not acquired ones. Internal development costs
are more frequent in this subsample than in other areas. The largest case in the subsample,
CSL, disclosed internal R&D costs, whereas Blackmores capitalized on some website
development cost. However, amounts of development costs capitalized remain extremely
13low compared with total intangibles.

CanadaThe Canadian sample consists of 25 companies, of which Concordia International is thelargest. Over the period 2013–2017, the number of observations tripled due to new
businesses specializing in cannabis products.
Concordia International is an interesting case because a large business acquisition (Covis
pharma) occurred in 2015. In 2017, intangibles were 75% of its total assets. The largest
category of intangibles is “acquired product rights,” which is much greater than goodwill
and amortized. Various categories of marketing intangibles were disclosed, including
customer lists and distribution contracts. After 2017, Concordia was renamed Advanz
Pharma and moved to Great Britain.
The second largest company, Knight Therapeutics, was spun off from Paladin in 2014.
Despite a relatively large size (48th worldwide in our sample), the company reported only
some licenses as intangibles, for only 1% of its total assets.
The remainder of cases consists in smaller firms, like Canopy Growth Company (58% of
intangibles) Aurora Cannabis (23% of intangibles), Aphria (1% of intangibles) that focus
on medical marijuana products. Their intangibles are quite comparable with European
pharma companies, despite the particularity of their business.

5.3. Asian Countries: China, Taiwan, Japan, Malaysia
Japan
The Japanese subsample consists of six companies only: Takeda, Otsuka, Daiichi Sankyo,
Eisai, Ono, and Santen. These cases are among the largest pharmaceutical companies
worldwide, in the top 25 firms in our sample. However, the magnitude of intangibles issignificantly lower than European “big pharma,” and disclosure is much less detailed.
These findings contrast with the economic literature regarding innovation, in which
Japanese firms are described as research-intensive (Corrado et al., 2013).

14

Figure 4. Japan

million USD

40000
30000
20000
10000
0

2013

Goodwill

R&D

2014

2015

2016

IT

Marketing

Scientific

2017
OthersJapanese companies disclose intangibles by nature in the notes, with categories like
patents, trademarks, distribution rights, and software that refer to the traditional categories
of registered intellectual property rights. The category “other” is used for items that do
not fit into these legal categories, even for large amounts (for example, in Takeda, annual
reports 2014–2017) 1. Judging from narratives, we determine that the categories used fordisclosure appear to be intricately linked with the underlying classification in accounts.
In the sample, the following are a few exceptions: several items grouped in the same
category as “patents and licenses” (Ono, annual reports 2013–2017); and some genericcategories like “product-related intangibles” (Takeda and Santen), and “core technology”(Eisai). The naming of these categories is also interesting because the distribution andcustomer-related elements are not emphasized, unlike in European companies.
Another Japanese particularity in disclosure is that capitalized development costs are
explicitly labelled “in-process R&D.” Otsuka, Eisai and Daiichi Sankyo report relatively
large amounts of these costs. In most cases outside Japan, “development costs” are notexplicitly referred to as acquired R&D, even if sometimes, one can understand their origin
from other explanations about business acquisitions in the notes.
TaiwanThe subsample for Taiwan consists of 30 companies. However, only Center Laboratories
report significant intangibles (19% of total assets). Other companies report only
In other subsamples, “other” is used only for negligible amounts that cannot be
included elsewhere.

115

negligible amounts of intangibles.

Figure 5. Taiwan
350

million USD

300
250
200
150
100
50
0

2013
Goodwill

R&D

2014

2015

2016

IT

Marketing

Scientific

2017
OthersCenter Laboratories is a diversified pharmaceutical company; their products include
drugs and infantile nutrition products. In 2015, a large business acquisition resulted in an
increase in intangibles shown in Figure 5. Center Laboratories (annual reports 2015–2017) reports intangibles by nature, with the following categories “goodwill,”“technology,” “customer relationships,” “trademarks and brands” and “milk rights.”
Other companies in the subsample reported very low intangibles, less than 1% of assets
for most cases. The most frequent category was software, and narratives were almost
absent.

China
The Chinese sample is made of 34 companies, 22 of which are among the 100 largest in
this study. As for the Taiwanese sample, most Chinese companies report few intangibles,
based on a classification by nature that is relatively harmonized in the subsample.
Narratives are also much shorter than those of European companies of the same size.

16

Figure 6. China

million USD

20000015000010000050000
0Goodwill

2013
R&D

2014
IT

2015

Marketing2016
Scientific

2017
OthersShanghai pharma is the largest case, a manufacturer of both chemical drug and Chinese
traditional medicine. After a large business acquisition in 2017 (Cardinal Health), thecompany became the largest distributor of foreign medicine in China. The categories used
are “goodwill,” “business network,” “patents and trademarks,” “know-how” and“computer software.”As far as R&D costs are concerned, Sino Biopharmaceuticals (annual reports 2013–2017)
and Shanghai Fosun (annual reports 2013–2017) report “acknowledged development
costs,” whereas 3SBio (annual reports 2014–2017) reports “in-process R&D.” Labelling
differences help the users of financial reports to clearly identify the nature of R&D
reported.

Malaysia
The subsample consists of eight companies, of which the largest is Goldis. Similarly with
the Chinese subsample, the magnitude of intangible assets is very low and disclosure isbased on a classification by nature. Categories used in this subsample are very similar toobservations in other Asian countries. For example, Goldis used goodwill, softwaredevelopment costs, and license in the notes.

17

6.

Concluding remarks

This survey investigated the accounting practices of pharmaceutical companies in theflexible frame of IFRS. A first observation is the great diversity of intangibles in thesample. Given the importance of these items, a certain level of standardization would
improve information comparability. This is already achieved in some Asian subsamplesof this study.
Second, we found that most small and middle-size companies reported intangibles bynature, whereas the largest companies adopted classifications by function. IFRS standards
do not prescribe any specific format; thus, both approaches are legitimate.
Providing information about the function of intangibles gives an indication about the
timeframe of the investment and its role in the business model. This may help assessing
uncertainty regarding the value of the intangible. In contrast, disclosure by nature issimpler and more precise when the number of intangible assets is only few.
Returning to the national differences regarding intangibles, the conclusion of this study
sounds like cultural stereotypes: reporting is concise in Asia, abundant in Europe,
optimistic in Commonwealth countries. Meanwhile, differences in the business modeland M&A activity greatly explain the magnitude of intangible assets.
It appears easier to harmonize the disclosure categories than the underlying differencesin the magnitude of intangible assets, therefore, it is worth considering harmonizing thedisclosure of intangible assets in IFRS.

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Acknowledgement
This research greatly benefitted from the support of AGISSS, the association ofresearchers at Gakushuin University Faculty of International Social Sciences, and from
JSPS kakenhi grant No. 17K13827.
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