Identifiable Intangible Asset Disclosures, Stock Prices and Future Earnings

21 Pages Posted: 17 Nov 2006

See all articles by Adam Ritter

Adam Ritter

University of Technology Sydney (UTS) - School of Accounting

Peter Alfred Wells

University of Technology Sydney, Accounting Discipline Group ; Financial Research Network (FIRN)

Abstract

As a consequence of regulatory reforms currently being initiated as part of international convergence, it is likely that the recognition and disclosure of identifiable intangible assets by Australian firms will cease. This study provides empirical evidence on how this will impact financial reports. First, evidence is provided of a positive association between stock prices and voluntarily recognized and disclosed identifiable intangible assets. Second, evidence is provided of a positive association between identifiable intangible assets and realized future period income. This provides insights into the nature of the information provided by intangible assets, and identifies a basis for the association between stock prices and identifiable intangible assets. This leads to the conclusion that identifiable intangible assets disclosures are value relevant, and that with the application of the restrictive recognition rules in AASB138 these disclosures in financial reports will be greatly diminished.

Suggested Citation

Ritter, Adam and Wells, Peter Alfred, Identifiable Intangible Asset Disclosures, Stock Prices and Future Earnings. Accounting and Finance, Vol. 46, No. 5, pp. 843-863, December 2006, Available at SSRN: https://ssrn.com/abstract=945480 or http://dx.doi.org/10.1111/j.1467-629X.2006.00190.x

Adam Ritter

University of Technology Sydney (UTS) - School of Accounting

P.O. Box 123
Broadway NSW 2007
Australia

Peter Alfred Wells (Contact Author)

University of Technology Sydney, Accounting Discipline Group ( email )

P.O. Box 123
Broadway NSW 2007
Australia
+61 (02) 9514 3628 / 3629 (Phone)
+61 (02) 9514 5515 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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