CII Calls for Intangible Assets Reform
CII urges review of intangible asset recognition to align with India's digital economy growth and value creation

“As India is transitioning towards a digital economy, the importance of intangible assets in today’s business models are increasing manifold. Investment in intangible assets, both internally generated and through acquisition, is critical to an enterprises’ capital allocation process,” the industry body said. (File Image: DC)
New Delhi: Industry body CII on Wednesday urged for comprehensive review for recognition of intangible assets for keeping pace with expansion of the digital economy. It also said that intangible assets have long been the engines for value creation in the world’s developed economies.
“As India is transitioning towards a digital economy, the importance of intangible assets in today’s business models are increasing manifold. Investment in intangible assets, both internally generated and through acquisition, is critical to an enterprises’ capital allocation process,” the industry body said.
An intangible asset is a non-physical asset that has value and is used to produce goods or services. Intangible assets are created from ideas, knowledge, and innovation. “Despite the importance of intangible assets to the capital markets, only those obtained via acquisition are recognised on balance sheets despite economic benefits being received also from internally generated intangible assets,” the CII said in a statement.
Emphasising on sharing a comprehensive set of recommendations to harness India’s potential of digital economy, Chandrajit Banerjee, director general, CII said, “While the relevance of intangible assets has evolved over decades, the standards to report on these have not. Inability to recognise internally generated intangibles means that such investments are largely excluded from the governance, financial reporting, and auditing ecosystems,” Banerjee said
“Therefore, such investments are less likely to have corresponding disclosures or be included in the management discussion and analysis, and are less likely to receive scrutiny from auditors, visibility to investors and comparability of financial statements. There are concerns that at least some of the differences between market capitalization and book value is due to non-recognition of internally generated assets,” he added.
“As India is transitioning towards a digital economy, the importance of intangible assets in today’s business models are increasing manifold. Investment in intangible assets, both internally generated and through acquisition, is critical to an enterprises’ capital allocation process,” the industry body said.
An intangible asset is a non-physical asset that has value and is used to produce goods or services. Intangible assets are created from ideas, knowledge, and innovation. “Despite the importance of intangible assets to the capital markets, only those obtained via acquisition are recognised on balance sheets despite economic benefits being received also from internally generated intangible assets,” the CII said in a statement.
Emphasising on sharing a comprehensive set of recommendations to harness India’s potential of digital economy, Chandrajit Banerjee, director general, CII said, “While the relevance of intangible assets has evolved over decades, the standards to report on these have not. Inability to recognise internally generated intangibles means that such investments are largely excluded from the governance, financial reporting, and auditing ecosystems,” Banerjee said
“Therefore, such investments are less likely to have corresponding disclosures or be included in the management discussion and analysis, and are less likely to receive scrutiny from auditors, visibility to investors and comparability of financial statements. There are concerns that at least some of the differences between market capitalization and book value is due to non-recognition of internally generated assets,” he added.
( Source : Deccan Chronicle )
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