Application of Principles-based Accounting Standards : the case of internally generated intangibles

The uncertainty involved in the application of principles-based financial accounting standards raises the general question of how such standards are applied. The International Financial Reporting Standards (IFRS) are principles-based, meaning that they provide a conceptual basis for application rather than detailed rules. This means that there is inherent room for judgment in the application, which might affect financial reporting comparability. This study aims to explore and understand the application of principles-based accounting standards. The study depicts the actual valuation of internally generated intangibles from a local perspective. The theoretical basis of this thesis is building on a Scandinavian institutional tradition since the focus is on a phenomenon that is shaped within a local context of meaning, where the judgments and the reasoning behind decisions occur. The study has a design that allowed for gathering data from several different organizations. Listed Swedish companies of different sizes and industries dealing with intangible accounting decisions and judgments are included. There are three main conclusions from this study. First, there is a continuous ambition for instrumentality and efficiency when making decisions regarding the valuation of internally generated intangibles. Second, the appearance of the company is always reflected against the expectations of relevant actors. Third, there is a co-existence of these two rationales. The judgments and the decisions within the companies are not independent of the external expectations and demands. Rather, they are affected by them through all the phases connected to research and development. A number of contributions to the literature are identified. These relate to the understanding of the application of principles-based accounting standards at an organizational level, and the development of the theoretical perspective within accounting research