Global Overhaul in Intangibles Accounting: What Practitioners Need to Know

In a technology-dominated economy, intangible assets—such as intellectual property, inventions, designs, software and proprietary data—are the leading drivers of enterprise value. Yet intangible assets are largely invisible in financial statements. Now, global accounting standard setting organizations are undertaking a long-overdue overhaul of these outdated frameworks to bring clarity, consistency and investor insight into the age of innovation.

The Problem: Intangibles Go Unseen

Despite reaching an estimated global value of $80 trillion in 2024, intangibles such as software and internally developed data models remain inconsistently recognized in accounting disclosures. In the U.S., intangibles now represent nearly double the investment in tangible assets as a share of gross domestic product, yet their treatment under Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) standards remains limited.

FASB received divergent feedback in its 2023–2025 preliminary research into whether and how to update intangibles-related guidance, with some stakeholders arguing no immediate action is necessary, and others warning that current disclosures are losing relevance for investors.

Redefining Intangibles for a New Economy

Currently, intangibles are narrowly defined as assets without physical substance that are identifiable and controllable. This excludes core assets, such as:

• Human expertise
• Proprietary AI models
• Internally developed software
• Brand equity

The IASB has unanimously voted to update its framework rather than rewrite it from scratch. However, the IASB acknowledged that fundamental changes are necessary, including reconsidering the definition of intangibles to encompass, for example, cryptocurrencies, carbon credits and non-traditional software assets.

Key Areas Under Scrutiny

1. Internally Generated vs. Acquired Intangibles

Firms can generally only recognize intangibles that result in direct cash returns or that are acquired externally. This creates a significant gap in financial reporting between organically growing firms and those growing through acquisition.

2. Accounting for Emerging Technologies

New methods like agile development and large language model training challenge the legacy logic of R&D expensing and capital recognition. This is especially urgent given the rise of software/hardware platforms powered by generative artificial intelligence (AI).

3. Disclosure vs. Recognition

The IASB appears to favor requiring firms to provide a description in financial statement notes rather than on balance sheets. This parallels the IASB’s treatment of goodwill and other non-quantifiable assets.

4. Need for Harmonization

Different recognition methods between business combinations and asset acquisitions increases the discrepancy of some intangibles over others based solely on transaction structure.

Planning for the Next Wave in Intangibles Accounting

1. Audit and Inventory Your Intangibles

• Include, non-capitalized software, AI models, datasets and training systems in your internal inventory—even if not currently reported.
• Use this audit to prepare for new disclosure rules.

2. Map R&D to Future Disclosures

• Identify which internal R&D projects (e.g., inventions, designs or products being developed, research in connection with AI or software) could fall under enhanced disclosure mandates.
• Track these developments.

3. Reevaluate Deal Structures

• Intangible asset recognition and tax treatment vary between asset acquisitions, M&A and potentially other factors. Evaluate which structure best reflects your intangible value.

4. Coordinate Across Teams

• Legal, compliance, finance and innovation teams should collaborate to ensure coherent asset valuation and documentation.

5. Stay Jurisdictionally Nimble

• With FASB and IASB evolving their approaches at different paces, multinational companies must prepare to report under multiple developing standards.

Implications

These developments align closely with my previous analyses of AI’s intersection with intellectual property. As intangible asset rules begin their overhaul, legal and financial professionals must consider frameworks that reflect additional enterprise value, not just historical cost or transactional convenience.

The upcoming changes are not just accounting tweaks. They are potentially a recalibration of how we define and document innovation, and they may shape legal strategies, compliance efforts and investor trust.

is a partner in Manatt, Phelps & Phillips’ Intellectual Property Protection and Enforcement business unit and is the author of Patent Prosecution: Law, Practice, and Procedure, 2025 Edition, and Constructing and Deconstructing Patents (2d Edition).

The Financial Accounting Standards Board is an independent, private-sector organization that establishes Generally Accepted Accounting Principles (GAAP) in the United States.

The International Accounting Standards Board develops and issues International Financial Reporting Standards (IFRS) used in many countries outside the U.S.

World Intellectual Property Organization & Brand Finance, Global Intangible Asset Value Estimate, 2024.

FASB Preliminary Research Summary & Stakeholder Comments, 2023–2025; see Global Rulemaker to Launch Major Intangibles Accounting Changes, June 2025.

IASB Meeting Summary, May 22, 2025; Global Rulemaker Launches Major Review of Intangibles Accounting, April 2024

See Patent Office Publishes Artificial Intelligence Strategy to Enable Responsible Innovation; and New Guidance on Use of Artificial Intelligence-Based Tools in Legal Practice.