With reference to the fundamental qualitative characteristics of useful financial information prescribed in the Conceptual Framework for Financial Reporting, explains why internally and externally generated intangibles are treated differently in the general purpose financial statements

Learning Goal: I’m working on a accounting discussion question and need an explanation and answer to help me learn.

Assume you have finished your Commerce degree and are now an accountant working for the AASB. Your manager who is an AASB Principal Fellow has asked you to write a business report which:

1. With reference to the fundamental qualitative characteristics of useful financial information prescribed in the Conceptual Framework for Financial Reporting, explains why internally and externally generated intangibles are treated differently in the general purpose financial statements. (Suggested words: 400)

2. Explains the accounting treatment with specific references to the Australian Accounting Standard(s) for

expenditure (over its/their lifetime, if applicable) on the following items:

  • Goodwill
  • Brand names (both externally and internally generated)
  • Research and development (Suggested words: 400)

3. In the context of agency theory, evaluates whether corporates should provide shareholders with additional disclosures for internally generated intangible assets. In your response, ensure you explicitly define, explain, and apply agency theory. (Suggested words: 450)

4. In the context of the managerial branch of stakeholder theory and relying on the expected primary users of the general purpose financial statements (as per the Conceptual Framework), identifies two stakeholders (other than shareholders and potential investors) and explicitly discusses whether and how additional disclosures on internally generated intangible assets would benefit the decision-making of each identified stakeholder. In your response, ensure you explicitly define, explain, and apply the managerial branch of stakeholder theory. (Suggested words: 300)

5. Provides one example of additional disclosure information that you would recommend for internally generated intangibles which are not currently required to be disclosed in the general purpose financial statements and justifies why this information should be disclosed.

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