Part Two: Too Little, Too Late? The Trouble with Reforming IAS 38

In Part One, we traced how accounting, in its devotion to reliability, taught itself to mistrust the very things that now define modern enterprise. Algorithms, brands, user networks, ideas, none of them visible, none of them countable. We explored why standards like IAS 38 quietly ignore these value-creators, and why that silence is not just technical, but philosophical. So before we look at the reforms and what little comfort they might offer, it’s worth revisiting how we ended up here, with balance sheets that seem increasingly irrelevant.

There’s something deeply human about reform that arrives just after the world has moved on. A few months ago, in May 2025, the International Accounting Standards Board (IASB) released a project plan that, on its face, seems admirably modern. It proposes to revisit IAS 38, that long-standing guardian of the intangible, and rethink what should be recognised, disclosed, and understood. The project is careful, comprehensive, and couched in consultation. And yet, beneath its procedural correctness, there lingers an unsettling question: What if the world it seeks to update has already left the building?

A quiet opening of the gates

To their credit, the IASB is asking the right questions.

They are no longer pretending that brand value, user data, or self-developed algorithms don’t exist. They are exploring, in parallel, two ideas: whether the definition of an intangible asset needs expanding, and whether the recognition criteria, that age-old pairing of “probable future benefits” and “reliable measurement”, can be softened, adapted, or perhaps reimagined.

There is also talk of better disclosures, i.e. ways to illuminate, at least in narrative, the economic reality that balance sheets ignore. Not quite full recognition, but rather a gesture, a signal that the profession sees what it has long refused to show.

And still, the hesitance remains palpable.

Disclosures in lieu of recognition

What seems most likely, at least in the near term, is a middle path: keep the existing ban on recognising most internally generated intangibles, but require companies to disclose more about them…their nature, their costs, and more importantly, their role in value creation. To me, it seems, in a way, a compromise, but one that reveals the underlying anxiety: we want to speak of the intangible without being held responsible for quantifying it.

There is, of course, some merit in this.

Disclosures offer nuance. They avoid the false certainty of numbers that cannot truly be audited, but they also signal a kind of institutional shame, an admission that the core financial statements, the ones most relied upon, are no longer enough.

Meanwhile, in the US…nothing much!

If IFRS is tentatively moving toward the light, US GAAP remains firmly in the bunker. There has been no comparable rethink of ASC 350 or the broader treatment of intangibles. Internally developed brands, customer relationships, even R&D outputs remain largely expensed. Recognition still hinges on whether the asset was acquired.

As if creativity, when purchased, becomes real, but when developed, remains ephemeral.

There are a few marginal differences: the US rules for software capitalisation are slightly more permissive in certain phases, and post-acquisition valuation of intangibles is sometimes more granular. But the direction of travel is the same. No embrace of subjectivity. No expansion of the intangible.

In both systems, you can build a cathedral, but if you carve it yourself, with your own hands, your own years, it cannot be counted. Only if you buy it does it become an asset.

Global GAAPs: a search for bravery

And what of other jurisdictions?

Luxembourg GAAP allows capitalisation of development costs. Australia, before aligning fully with IFRS, once permitted revaluation of intangibles under a looser regime. But these were exceptions, and even they have fallen into line. Around the world, the pattern repeats:

The more valuable something is, the more likely it is to be excluded if it cannot be verified.

Which leads us back to a more uncomfortable thought.

Perhaps this is not a flaw in the standards. Perhaps it is the standards doing exactly what they were designed to do: exclude judgment, doubt, intuition, all the things that make us human, and therefore fallible.

But what if that architecture, once protective, is now suffocating?

The risk of late realisation

The tragedy may not be that we refused to act. It may be that we are acting just as the world shifts again. Today’s firms are not just intangible-heavy, they are intangible-native.

They operate in ecosystems of trust, attention, and code. The most valuable firms of the next decade will likely hold even fewer physical assets than today’s, and more ambiguity. AI models, reputational capital, and tokenised intellectual property, all things that defy neat classification.

I do not doubt that by the time the revised IAS 38 is finally redrafted, the game may have already changed once again, and we may find ourselves, yet again, crafting standards for a world that has already moved on and evolved even further.

What now, then?

Indeed, there are absolutely no easy answers.

Recognition brings risk, disclosure brings incompleteness, while full abandonment of structure brings chaos.

But perhaps the answer lies not in choosing one, but in finally admitting what we’ve known all along: That accounting was never meant to capture everything. That value, especially now, resists full translation into numbers. And that the job of the financial statements is not to measure perfectly, but to signal wisely. To say, in effect:

Here is what we can show you. And here is what you must seek beyond the page.

A Closing Thought: From Ledger to Language

Perhaps the end of accounting, as Lev and Gu suggest, is not really an end, but a transformation. From ledger to language, from rules to reason, from record-keeping to meaning-making. And in that shift, accounting doesn’t lose its purpose. It rediscovers it, not to merely report what happened, but to help us understand what matters.