Negative as Well as Social Consequences of the AASB 138 Intangible As

Question: Discuss about the Negative as Well as Social Consequences of the AASB 138 for Intangible Assets. Answer: Introduction The AASB 138 was initially introduced in Australia by July 2004. This was mainly aimed at providing some standards on how numerous intangible assets are valued. Under this accounting standard, research has to be written off once they are incurred (Brahim and Arab 2012). With these considerations, this paper aims to present some negative and social consequences of the introduction of AASB 138. To start with, introduction of the AASB 138 has some negative effects in that reporting organizations that has at one point incurred expenses on their research which was expected to generate some economic benefits were forced to incur some costs to cater for their expenditures. In this case, these expenditures are mainly treated similar to expenditures on the research which is believed to result in future economic benefits (Cheung, Evans and Wright 2008). Therefore, this accounting standard does not permit individuals to differentiate in between organizations that have valuable research as well as those one that do not have; hence, from the efficiency perspective, merit of AASB 138 is highly questionable. In essence, under AASB 138, all organizations are usually treated similarly irrespective of their success status, both the unsuccessful and the successful researchers (Jaafar 2011). As a result, managers would know that those researches they undertake would have some negative impact on their profitability. For instance, those firms suffering from poor profit might view that it is preferable to defer the research until the subsequent periods when their profits are higher and thus, they are better in absorbing their expenditures. The reduced expenditure from conservative treatment would have some obvious economic impacts. As a result suppliers of research-connected supplies would receive lesser finances. On the other hand, introduction of AASB 138 resulted to some social consequences. For instance, adoption of the AASB 138 encourages different organization to increase their personnels education; hence, making these personnel active members in the society growth and development. Introduction of the AASB 138 also alleviates the conservative behaviour of potential investors. This means that introduction of the AASB 138 makes investors less conservative while making their investment decision. Further, introduction of AASB 138 would make managers act appropriately in maximizing their reputation; hence, maximizing their remuneration from their future and current personnel. This means that introduction of the AASB 138 bring a tendency of being more attentive while remunerating future and current personnel; hence, maximizing their remunerations. References Brahim, HB and Arab, MB 2012, The relevance of the information about intangibles: Some determinants, International journal of accounting and financial reporting, 2(1), 219. Cheung, E, Evans, E and Wright, S 2008, The adoption of IFRS in Australia: The case of AASB 138 (IAS 38) Intangible Assets. Australian Accounting Review, 18(3), 248-256. Hunter, L, Webster, E and Wyatt, A 2012, Accounting for expenditure on intangibles, Abacus, 48(1), 104-145. Jaafar, H 2011, Accounting for intangible assets, firm life cycle and the value relevance of intangible assets (Doctoral dissertation, University of Tasmania).