Published Online:July 2025
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP090725
DOI:10.71329/IUPJARAP/2025.24.3.169-194
Author Name:J Madegowda
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:169-194
The paper examines the practical application of principles-based accounting standards, specifically focusing on IAS 38: Intangible assets. It explores how professional judgment and materiality considerations influence the recognition, measurement, and disclosure of intangible assets, providing insights into the challenges and implications of implementing a principles-based approach. The study uses a mixed-methods approach, integrating an extensive review of literature and professional guidelines with an analysis of real-world case studies across various jurisdictions and industries. The study reveals that inconsistencies in financial reporting under IAS 38 are primarily attributable to varying interpretations of its key provisions and the discretionary application of “materiality” and “professional judgment”. This significantly affects intangible asset recognition and disclosure practices, leading to reduced transparency and limited comparability across firms and jurisdictions. Although the principles-based nature of IAS 38 permits flexibility, it also presents a few challenges in achieving uniformity and reliability in financial statements. The paper offers practical implications for standard-setters, preparers, and auditors by suggesting enhancements to existing guidance on applying judgment and materiality in the context of IAS 38. Recommendations include clearer definitions of critical concepts, industry-specific implementation guidelines, and increased focus on professional training to reduce discrepancies in practice.
Intangible assets are increasingly critical to organizational success and value in today’s knowledge-driven economy.