THE DIFFERENCES BETWEEN CAPITALIZING INTANGIBLE ASSETS AND RECOGNIZING THEM AS EXPENSES IN ENTERPRISES. BASED ON IAS 38

Abstract

This study examines the differences between capitalizing intangible assets and recognizing them as expenses under IAS 38 and evaluates their effects on financial reporting and performance measurement. The study illustrates how recognition decisions affect total assets, profitability, and financial ratios through a qualitative examination of international standards and a quantitative examination of the financial statements of IFRS-reporting businesses, including Siemens AG and SAP SE. The results demonstrate that while capitalization lowers leverage ratios and improves the statement of financial condition, it also introduces subjectivity and the possibility of distortion in performance metrics like ROA. On the other hand, expenses increase comparability and dependability while decreasing present profit. The study comes to the conclusion that stakeholders' perceptions of financial health are greatly influenced by how intangible assets are treated in accounting, particularly in knowledge-based businesses where these assets account for a sizable portion of company value