The application of IAS 38 'intangible assets' in local franchises' financial statements : a survey

Abstract

One of the most popular intangible assets is franchising. In many countries, franchising is becoming a larger percentage of daily trade. Indeed, accounting for franchising becomes more important for relevant financial reporting. Thus, this study aims to analyse whether businesses in charge of franchised operations in Malta, are in actual fact implementing IAS 38 in their accounts. The type of treatment accounted in the financial statements, problems faced in implementing the correct treatment or in using the standard were also analysed. This research is also intended to provide the view of practitioners in local franchisees' businesses with regards to the relevance of the standard and their willingness to show the franchise as an intangible asset. The various interviews that were conducted with the persons responsible for the preparation and presentation of financial statements of local franchisees have shown that the franchisors' charges affect the applicability of IAS 38. It can also be concluded that even though the requirements of the standard are not specifically referred to, they are applied through the practices followed by local practitioners. The dissertation also presents recommendations by which more information on intangible assets can be disclosed in the financial statements.