IFRSs and accounting for intangible assets: the Telecom Italia case

Purpose – The purpose of this paper is to show whether and how International Financial Reporting Standards (IFRSs) are able to improve the quality of financial accounting information concerning intangible assets. Design/methodology/approach – Being part of a wider project investigating the ability of IFRSs to improve accounting information concerning intangibles, this paper analyses the application of some IFRSs’ key innovations to Telecom Italia. Considered innovations include two of the most relevant areas of change between Italian accounting principles to IFRSs, i.e. business combinations and accounting for intangible assets with indefinite useful life. Quality of accounting information is measured through four key parameters: correctness, transparency, prudence, and timeliness. Representation provided by Italian accounting principles and US GAAP of selected accounting events are compared in terms of the four key parameters, and differences in accounting information quality are systematically observed. Findings – The findings in this paper show that the use of value-based measures in accounting actually leads to an improvement in the overall quality of information, by increasing correctness and transparency and leaving prudence and timeliness nearly unchanged. These early findings seem to support the conclusion that the path chosen by accounting evolution is correct, although some critical areas still exist. Practical implications – The methodology proposed in this paper can represent a potential guideline for a wide range of researches concerning the quality of accounting information. Originality/value – This paper provides three main contributions: a complete and structured critical review of literature on the evolution of accounting on intangible assets; an innovative framework to measure the quality of accounting information; a first in-depth analysis of the key changes in accounting for intangibles induced by IFRSs on the balance-sheets of Italian companies (through the case study)