Ifrs Case Queation

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1. According to U.S. GAAP, revaluation is not permitted for all types of intangible assets. Under IFRS, revaluation to the fair value of intangible assets other than goodwill is an allowable alternative treatment. This is a good difference between U.S. GAAP and IFRS.

Sometimes, intangible assets do change rapidly over time. For example, a trademark may not be noteworthy at the transaction. However, as the company becomes larger and larger, the underlying value of the trademark would increase significantly. In addition, intangible assets might not have the same level of dollar value as fixed assets. But investors look at them to make decisions because they represent the company’s internal value and culture. Therefore, reflecting the true value of intangible assets in financial statements is critical to investors. Do you think it is more reasonable to allow revaluation for intangible assets under U.S. GAAP in the future? What limitations will be imposed if it is allowed?

2. According to IAS 16, property, plant and equipment (PP&E) can be accounted for at either historical cost or at fair value using the revaluation model. Under U.S. GAAP, however, revaluation method is never allowed to measure PP&E.

In 2006, Ernst &Young LLP provided an overview of 65 selected large, multinational companies reporting using IFRS. Only one company used the revaluation option for any of its PP&E. Given the policy that revaluation is allowed to measure PP&E, why would almost all the companies didn’t choose to use revaluation method, which might increase their fixed assets? Is it because the process is too complicated? Or is it because they want to closely follow U.S.

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