1. Introduction
1.1 Research background
The adoption of international financial reporting standards (IFRS) has become a trend
in the international capital market. The European Union (EU), Australia, Singapore
and Hong Kong have adopted IFRS since year 2005. Others such as Canada, Korea and
principles-based accounting standards, IFRS provides firms with more flexibility to
voluntarily disclose information. Second, International Accounting Standard No. 38
(IAS 38): intangible assets requires companies to recognize intangible assets whether
purchase or self-created if it is probable that the future economic benefits that are
attributable to the asset will flow to the entity and if the cost can be reliably measured.
The process of self-created intangible assets involves two phases, i.e. research and
development stages. Companies charge research costs to expense. Development costs
are capitalized only after technical and commercial feasibility of the asset for sale or
use have been established. Thus, after the adoption of IFRS, UK companies are allowed
to capitalize the development costs for internally generated intangible resources, which
could lead to greater disclosure of intellectual capital.