Accounting, Intangible Assets, Stock Market Activity, and Measurement and Disclosure Policy: Views from the UK

56 Pages Posted: 18 Jul 2009

See all articles by Elisabeth Dedman

Elisabeth Dedman

Surrey Business School

Sulaiman Mouselli

affiliation not provided to SSRN

Yun Shen

University of Nottingham, Ningbo

Andrew W. Stark

Alliance Manchester Business School, University of Manchester

Date Written: January 30, 2009

Abstract

This paper considers the impact of UK practices with respect to the measurement and disclosure of intangible assets, focusing on RD activities. We first update prior UK work relating RD activities to market prices. Second, given the clearly identified role of disclosure outside of the financial statements in helping market participants value RD expenditures, we consider whether market forces are generally sufficient to ensure adequate disclosures with respect to intangibles by considering the cases of two biotechnology firms involved in the issuance of misleading disclosures. Within this context, we consider how disclosure regulation and enforcement mechanisms have evolved in recent years, and how this evolution has likely been affected by our ‘scandal’ cases. Our conclusions are that the case of the UK does not give rise to any wide-scale concerns about the economic ill-effects caused by the current state of recognition and disclosure with respect to expenditures on intangibles. Further, market forces are unlikely to be sufficient in ensuring honest and timely disclosures with respect to intangibles, but the combination of official regulation and voluntary self-regulation appears to have stemmed the tide of any such disclosure scandals in the UK.

Keywords: accounting policy, intangibles, value relevance, asset pricing, disclosure regulation

JEL Classification: M41, M45, G12, G29

Suggested Citation

Dedman, Elisabeth and Mouselli, Sulaiman and Shen, Yun and Stark, Andrew W., Accounting, Intangible Assets, Stock Market Activity, and Measurement and Disclosure Policy: Views from the UK (January 30, 2009). Available at SSRN: https://ssrn.com/abstract=1435783 or http://dx.doi.org/10.2139/ssrn.1435783

Elisabeth Dedman (Contact Author)

Surrey Business School ( email )

University of Surrey
Stag Hill Campus
Guildford, GU2 7XH
United Kingdom

Sulaiman Mouselli

affiliation not provided to SSRN ( email )

Yun Shen

University of Nottingham, Ningbo ( email )

199 Taikang East Road
Ningbo, Zhejiang 315100
China

HOME PAGE: http://www.nottingham.edu.cn

Andrew W. Stark

Alliance Manchester Business School, University of Manchester ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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