Valuing Intangible Assets: A Balance Sheet Approach for DS30 Listed Companies

Abstract

Intangible assets are increasingly being viewed as valuable financial resources for businesses and non-profit entities alike, making it crucial to include these assets in Balance Sheets. However, valuing intangible assets is not a simple task and is largely subjective, leading to strikingly different valuations for the same assets. As a result, the expected future benefit from these assets is not always apparent. In this paper, we focus on the value of intangible assets in the DS30 (Dhaka Stock Exchange 30) index constituent companies and examine if accounting or management practices have underrepresented them in Balance Sheets. This paper provides evidence that despite the challenges in valuing them, recognizing intangible assets is crucial for improving the quality of relevance and reliability of financial reporting. We also show that the phenomenon of underreporting distorts the relationship with market price and book value. Moreover, we examine the inconsistencies that exist between the reporting and measurement of internally created and purchased intangible assets.

Keywords: Intangible Asset; Valuation of Intangible Asset; Return on Intangible Asset

Australian Academy of Accounting and Finance Review, vol 2, issue 2, April 2016, page 119-135