Ágnes Márta Dr. Saxné Dr. Andor

256 Pages·2014·5.28 MB·English

Ágnes Márta Dr. Saxné Dr. Andor

The Accounting Theory of Intangible Assets and its Application
Under the Hungarian Regulations
The Accounting Theory of Intangible Assets and its Application Under the Hungarian Regulations

Financial Accounting Department

Supervisor: Dr. János Lukács, CSc

© Ágnes Márta Dr. Saxné Dr. Andor, 2014
All rights reserved.

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The Accounting Theory of Intangible Assets and its Application Under the Hungarian Regulations

Corvinus University of Budapest
Management and Business Administration Doctoral
Program

The Accounting Theory of Intangible Assets and its Application
Under the Hungarian Regulations

Ph.D. dissertation

Ágnes Márta Dr. Saxné Dr. Andor

Budapest
2014

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The Accounting Theory of Intangible Assets and its Application Under the Hungarian Regulations

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The Accounting Theory of Intangible Assets and its Application Under the Hungarian Regulations

Table of contents
LIST OF FIGURES .......................................................................................................... 8
LIST OF TABLES ........................................................................................................... 9
1. INTRODUCTION ...................................................................................................... 11
1.1. Objective of the research ............................................................................. 11
1.2. Definitions ................................................................................................... 11
1.3. Definition of the subject matter ................................................................... 12
1.4. Research questions ...................................................................................... 14
2. THE CONNECTION BETWEEN INTELLECTUAL CAPITAL AND THE ECONOMY ....... 15
2.1. The impact of intellectual capital on economic development ......................... 15
2.2. Deviations between a company’s book value and market value ..................... 21
3. FUNDAMENTALS OF INTELLECTUAL CAPITAL ...................................................... 27
3.1. Evolution of the academic concept of intellectual capital ............................... 27
3.2. The concept of intellectual capital ................................................................... 28
3.3. Classification of intellectual capital elements ................................................. 30
4. CHARACTERISTICS OF INTANGIBLE ASSETS .......................................................... 34
4.1. Identifiability ................................................................................................... 34
4.2. Possession ........................................................................................................ 35
4.3. Economic benefit ............................................................................................. 36
4.4. Economic value ............................................................................................... 37
5. INTANGIBLE ASSETS IN THE FINANCIAL STATEMENT ............................................ 38
6. BASIC PRINCIPLES OF ACCOUNTING ...................................................................... 41
6.1. The theoretical structure of accounting ........................................................... 41
6.2. Use of the basic principles of accounting in the presentation of intangible
assets ....................................................................................................................... 43
7. CONDITIONS OF THE CAPITALISATION OF INTANGIBLE ASSETS ........................... 45
7.1. Recognisability and presentability .................................................................. 45
7.2. Capitalisation criteria in the international frameworks ................................... 47
7.2.1. Criteria applicable to the capitalisation of assets ................................................ 48
7.2.2. Criteria applicable to the capitalisation of intangible assets ............................... 49
7.2.3. Recognition criteria .............................................................................................. 50
7.3. Capitalisation in the Hungarian framework .................................................... 52
7.4. Advantages of capitalisation............................................................................ 54
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The Accounting Theory of Intangible Assets and its Application Under the Hungarian Regulations

7.5. Restrictions applicable to capitalisation .......................................................... 55
7.5.1. General restrictions applicable to capitalisation ................................................. 55
7.5.2. Restrictions applicable to capitalisation as stipulated in regulations .................. 57
7.6. Criticisms concerning capitalisation criteria ................................................... 61
7.7. Types of capitalised intangible assets.............................................................. 64
7.8. Willingness to capitalise .................................................................................. 67
8. VALUATION OF INTANGIBLE ASSETS ..................................................................... 69
8.1. Identification, presentation and valuation ....................................................... 69
8.2. Valuation principles and procedures ............................................................... 70
8.3. Valuation of intangible assets upon acquisition .............................................. 73
8.3.1. Recognition through internal development ........................................................... 73
8.3.2. Recognition from external sources ....................................................................... 74
8.4. Valuation of intangible assets at the end of the year ....................................... 76
8.4.1. Treatment of ordinary depreciation ...................................................................... 76
8.4.2. Treatment of impairment losses ............................................................................ 79
8.4.3. Treatment of value adjustment .............................................................................. 80
9. QUANTIFICATION OF THE VALUE OF INTANGIBLE ASSETS ................................... 83
9.1. Necessity of the valuation of intangible assets ................................................ 83
9.2. Measurement models ....................................................................................... 84
9.2.1. Classification of measurement models .................................................................. 84
9.2.2. Applied measurement models ................................................................................ 85
9.3. Valuation of intangible assets in practice ........................................................ 87
9.4. Conclusions concerning the valuation of intangible assets ............................. 88
10. DISCLOSURE CONCERNING INTANGIBLE ASSETS ................................................ 91
10.1. General information about disclosure ........................................................... 91
10.2. Statutory disclosure ....................................................................................... 93
10.3. Voluntary disclosure ...................................................................................... 97
10.3.1. Intellectual capital statement for internal stakeholders ...................................... 97
10.3.2. Intellectual capital statement for external stakeholders ..................................... 99
11. CONSIDERATIONS CONCERNING INTANGIBLE ASSETS ...................................... 101
12. RESEARCH HYPOTHESES ................................................................................... 105
13. VERIFICATION OF THE HYPOTHESES ................................................................. 109
13.1. Scope of the research, data sources ............................................................. 109
13.2. Characteristics of the various databases ...................................................... 111
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The Accounting Theory of Intangible Assets and its Application Under the Hungarian Regulations

13.2.1. Data from corporate income tax returns (AB1 database)................................. 111
13.2.2. Data from separate financial statements (AB2 database) ................................ 114
13.2.3. Data from the certified accountants’ survey (AB3 database) ........................... 116
13.2.4. Other data sources ............................................................................................ 117
13.3. Verification of Hypothesis H1 .................................................................... 118
13.3.1. Verification of Subhypothesis H1/a ................................................................... 118
13.3.2. Verification of Subhypothesis H1/b ................................................................... 123
13.4. Verification of Hypothesis H2 .................................................................... 125
13.4.1. Verification of Subhypothesis H2/a ................................................................... 125
13.4.2. Verification of Subhypothesis H2/b ................................................................... 135
13.5. Verification of Hypothesis H3 .................................................................... 142
13.6. Verification of Hypothesis H4 .................................................................... 150
13.6.1. Verification of Subhypothesis H4/a ................................................................... 150
13.6.2. Verification of Subhypothesis H4/b ................................................................... 154
14. CONCLUSIONS .................................................................................................... 158
14.1. Conclusions of the research ......................................................................... 158
14.2. Further suggestions and proposals for the improvement of the Hungarian
regulations ............................................................................................................ 162
ANNEX 1 – THE RELEVANT PART OF FORM-1129 (CORPORATE TAX RETURN) ...... 166
ANNEX 2 – LISTED COMPANIES IN THE RESEARCH ON THE BUDAPEST STOCK
EXCHANGE IN 2011 .................................................................................................. 171
ANNEX 3 – SURVEY .................................................................................................. 173
ANNEX 4 – THE STATISTICS OF HYPOTHESIS H1 .................................................... 179
The statistics of Subhypothesis H1/a) .............................................................................. 179
The statistics of Subhypothesis H1/b) .............................................................................. 187
ANNEX 5 – THE STATISTICS OF HYPOTHESIS H2 .................................................... 191
The statistics of Subhypothesis H2/a) .............................................................................. 191
The statistics of Subhypothesis H2/b) .............................................................................. 201
ANNEX 6 – THE STATISTICS OF HYPOTHESIS H3 .................................................... 215
ANNEX 7 – THE STATISTICS OF HYPOTHESIS H4 .................................................... 229
The statistics of Subhypothesis H4/a) .............................................................................. 229
The statistics of Subhypothesis H4/b) .............................................................................. 237
REFERENCES ............................................................................................................ 247
PUBLICATIONS OF THE AUTHOR IN THE FIELD OF THE DISSERTATION ................ 256

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The Accounting Theory of Intangible Assets and its Application Under the Hungarian Regulations

List of figures

Figure 1 Contribution rate of economic sectors to GDP in EU-27 (2006-2011) 17

Figure 2 Contribution rate of economic sectors to GDP in Hungary (2006-2011) 17

Figure 3 Distribution of the global corporate value (2001-2008) 23
Figure 4 Distribution of acquisition price 24
Figure 5 Explanation for difference between book value and market value I. 24
Figure 6 Explanation for difference between book value and market value II. 25
Figure 7 Knowledge base of the community 31
Figure 8 Overview of intellectual capital elements 33
Figure 9 Economic assets in dimension of dimension and exclusivity 35

Figure 10 Theoretical structure of accounting 43
Figure 11 Capitalisation test in case of intangible assets I. 47
Figure 12 Grouping of assets 50
Figure 13 Capitalisation test in case of intangible assets I. 52
Figure 14 Grouping of intangible assets in Hungarian accounting regulation 67
Figure 15 Identification, presentation and valuation in accounting procedures 69
Figure 16 Valuation principles, procedures and balance sheet theories 72
Figure 17 Limited and unlimited protection periods in Hungarian industrial and 78
copyright law

Figure 18 Changes in value of intangible assets 82
Figure 19 Relation between asset life cycle and valuation procedures 89
Figure 20 Model of Intangible Assets Monitor 97
Figure 21 Model of Skandia Navigator 98
Figure 22 Intangible assets in financial statements in dimension of business 140
activity

Figure 23 R&D costs in financial statements in dimension of business activity 140

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The Accounting Theory of Intangible Assets and its Application Under the Hungarian Regulations

List of tables

Table 1 Statutory disclosures in regulations 95
Table 2 Specific data in corporate tax returns used for the purpose of filtering 113

Table 3 Variables of corporate tax returns included in the analysis 114
Table 4 Frequency of intangible assets in the financial statements 120
Table 5 Frequency of internally developed intangible assets 123

Table 6 Development of headcount categories 2007-2011 126

Table 7 Development of total assets categories 2007-2011 127

Table 8 Development of turnover categories 2007-2010 127

Table 9 Intangible assets in dimension of balance sheet total 128
Table 10 Intangible assets in dimension of turnover total 128
Table 11 Research expenses in dimension of balance sheet and turnover total 130

Table 12 Intangible assets in dimension of balance sheet total 133

Table 13 Intangible assets in dimension of turnover 134

Table 14 Three-cluster analysis based on Ward’s method 136
Table 15 Interpretation of clusters 137

Table 16 Final cluster centres 137
Table 17 Number of cases in the 3 clusters 138
Table 18 Answers concerned business sector questions 139
Table 19 Explanation for the deviation between the balance sheet value and 143
the net value as of the balance sheet date of intangible assets in
corporate tax return

Table 20 Deviation between the balance sheet value and the net value as of the 143
balance sheet date of intangible assets in corporate tax return
Table 21 Value adjustment of intangible assets in financial statements 146

Table 22 Market value of intangible assets quantified 147
Table 23 Resources used for market valuation 147
Table 24 Methodology used for market valuation 148
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The Accounting Theory of Intangible Assets and its Application Under the Hungarian Regulations

Table 25 Reasons for limited disclosure of intangible assets 152
Table 26 Evaluation of additional information concerning intangible assets 153
Table 27 Mandatory disclosure concerning intangible assets in dimension of 155
balance sheet total

Table 28 Mandatory disclosure concerning intangible assets in dimension of 155
turnover

Table 29 Voluntary disclosure concerning intangible assets in dimension of 156
balance sheet total

Table 30 Voluntary disclosure concerning intangible assets in dimension of 156
turnover

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