The IAS/IFRS application on the intangible assets of non-listed companies

With the introduction of IFRS most of the intangibles are expensed on the income statement and hence they “disappear” from the balance sheet, while investments in tangible assets are capitalized.Based on a sample of 128 firms, made up of 99 SMEs and 29 large firms, and through a simulation of IAS transition, our study finds that IAS 38 reduces the amount of intangible assets recognized on the balance sheet of SMEs, while large firms do not appear to experience such large reductions in their intangible assets. The differential effect of IAS 38 on SMEs and large firms can be explained by the different growth strategies of these firm types. SMEs largely depend on internal paths of growth and intangibles assets that typically arise from internal growth strategies are eliminated from the balance sheet under IAS 38. Larger firms are less exposed to such reductions in their intangibles assets, because they mostly follow external paths of growth and the treatment of those intangible assets that typically arise from external growth strategies requires the impairment test.