Adoption of IFRS or US GAAP on intangible assets and the potential effect on the final result. A theoretical overview

Adam Smith’s book “The Wealth of Nations” published in 1776 (see the newer edition of 2009), regarded as a classical school of economic theory, stated that the wealth of a nation comes from tangible or physical assets only, or to be more precise, from production factors such as labour, land and capital. Nowadays, this theory is no longer meaningful in this modern knowledge-based economy (Wang, 2008). The global economy has dramatically changed during the last thirty years. The change in the form of the transition from industrial capitalism to knowledge-based capitalism was a revolution in the corporate world. Tangible or physical assets no longer represent the core of a knowledge-based economy. Instead, intangible assets are now seen as its centre. Even though there is no particular definition of a knowledge-based economy, three main structural changes have appeared (Guidelines for managing…, 2002): 1) knowledge is seen as an object of potential trade; 2) the interrelation between different knowledge has improved; 3) Information and Communication Technologies (ICT) enable a higher diffusion of knowledge, by allowing the development of new and sophisticated networks between the subjects of knowledge. These three structural changes completely modified the global business model of companies that was available in the previous industrial revolution. Owing to the vast development of the Internet and advanced technology, data, information and knowledge are widespread and generally available. In the process of sharing and collecting necessary knowledge, companies can improve their businesses much more easily.