Financial accounting Essay Example | Topics and Well Written Essays - 1500 words - 2

Financial accounting - Essay Example Another reason in support of recognizing the goodwill intangible assets is that decision to acquire assets from others reflects there is intangible asset value of the asset acquired. The extent of a business acquiring another business entity facility or brand name instead of developing its own demonstrates that an external value of intangible asset exist in the market transaction. Consequently, business organizations should recognize the external value triggering acquisition of external market value attached to the assets to reflect the real value of the business entity in the balance sheet statement. However, there has been argument against recognition of the various intangible assets in the balance sheet financial statement. One of the arguments against recognition of intangible assets in the balance sheet is that it enhances the earnings information since the balance sheet financial statement will be cleansed from soft assets that have no physical substance. In addition, balance sheet information quality is improved since the cost of managing earnings is relatively reduced (Wahlen, Bradshaw, Baginski, & Stickney, 2010). Another reason against recognizing intangible assets in the balance is the uncertainty and difficult to ascertain the ability of asset recognized will generate revenue in future. Consequently, recognition of goodwill, market-related assets and contract related assets has the potential of causing material bias on the value of the business entity according to arguments against recognition of intangible assets in the balance sheet statement. Amortization of intangible assets faces both support and disapproval due to the potential material effect it causes in the balance sheet statement. One of the reasons in support of amortization of intangible asset is that the ability of a business to generate revenue in different financial is influenced by the market reputation of it brand name.