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The value relevance and reliability of intangible assets : Evidence from Australia before and after adopting IFRS

Xu-Dong Ji (School of Accounting, Faculty of Business and Law, La Trobe University, Bundoora, Australia)
Wei Lu (Department of Accounting and Finance, Faculty of Business and Economics, Monash University, Caulfield East, Australia)

Asian Review of Accounting

ISSN: 1321-7348

Article publication date: 26 August 2014




The purpose of this paper is to examine the value relevance of intangible assets, including goodwill and other types of intangibles in the pre- and post-adoption periods of International Financial Reporting Standards (IFRS). Most importantly, this paper investigates whether the value relevance of reported intangible assets is associated with their value reliability. Furthermore, this paper reports whether the adoption of IFRS improves the value relevance of intangible assets and alters the relationship between value relevance and reliability.


Both price and return models based on Ohlosn theory (1995) are employed to test the value relevance and value reliability of intangibles. Australian-listed firms with capitalised intangibles from 2001 to 2009 are selected in this study. The sample includes 6,650 firm-year observations.


The main result shows that capitalised intangible assets are value relevant in Australia, in both the pre- and post-adoption of IFRS periods. Value relevance is higher in firms with more reliable information on intangible assets. This study finds that the value relevance of intangibles has declined in the post-adoption period of IFRS. However, the positive relationship between the value relevance and the reliability of intangibles has remained unchanged in the post-adoption period.


The paper contributes a new measurement of value reliability of accounting information about intangibles. This paper is one of few studies on the relationship between value relevance and reliability of intangible assets. The results show that value relevance is positively associated with value reliability. This suggests that, when accounting standard setters assess whether the existing IFRS of intangibles should be improved in the future, they need to think not only in terms of whether the standard can provide more relevant information of intangibles to investors but also whether the standard can make the information of intangibles more reliable.



Ji, X.-D. and Lu, W. (2014), "The value relevance and reliability of intangible assets : Evidence from Australia before and after adopting IFRS", Asian Review of Accounting, Vol. 22 No. 3, pp. 182-216.



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