SINGAPORE - A public consultation has been launched to gather views on a framework meant to help businesses disclose their intangible assets, as part of a move to improve transparency in the market.
Intangible assets are non-physical assets of a company that include technologies, brand recognition, trade secrets and intellectual property such as patents, copyrights and trademarks.
The public consultation, launched by the Accounting and Corporate Regulatory Authority (Acra) and the Intellectual Property Office of Singapore (Ipos), runs from Wednesday to Feb 28, 2023.
The Intangibles Disclosure Framework was developed by a working group comprising representatives from a mix of industries and from companies such as the Big Four accounting firms, various banks and the Singapore Exchange Regulation.
Mr Frederick Chin, co-chairman of the working group and UOB’s head of group wholesale banking and markets, said: “As businesses increase their investments in intangible assets, there is a need for an intangibles disclosure framework to help improve transparency and decision-making by private and capital market players.”
For example, such a framework would give banks a better understanding of how these assets contribute to the cash flow of businesses.
This, in turn, could improve financing for a company as investors and financial institutions would have clearer insights into its intangible assets.
The framework consists of four pillars – strategy, identification, measurement and management. They cover areas such as how these assets help to generate returns for a company and its investors, what sort of metrics and targets are used to measure the performance of these assets, and what the risks and opportunities are.
The framework is part of the Singapore Intellectual Property Strategy 2030 road map that was launched in April 2021. The long-term goal of the 10-year blueprint is to build a credible and trusted intangible asset valuation and reporting system to help enterprises manage and commercialise these assets.
Globally, intangible asset valuation and reporting are still nascent, and no jurisdiction has developed such a disclosure or valuation framework for such assets, the group said in a consultation report.
This is despite investments in intangible assets overtaking investments in tangible assets over the past two decades.
Payments for the use of intellectual property globally have ballooned 74 per cent over the past decade to hit US$515 billion (S$694 billion) in 2021, representing more than 9 per cent of the global import of services, according to data from the World Bank.
“These trends and statistics are expected to continue, and drive the need for a framework that allows for consistent identification, categorisation and disclosure of intangibles,” the report said.
The lack of such a disclosure framework will also mean that intangibles that are internally generated may not be recognised in financial statements, and lead to an underappreciation of such assets.
Giving a valuation to such assets will also open up various ways to commercialise them. For example, start-ups with minimal cash flow but with a strong portfolio of intangibles may be in a better position to raise capital or get financing.
The report added: “These options and opportunities cannot be captured if enterprises are not sensitive to the need to understand, measure and disclose the contribution of intangibles to their business value and growth.”
The consultation documents can be found on the Acra and Ipos websites and the Reach consultation portal. The public can submit their comments via FormSG.
