The Accounting and Valuation of Intangible Assets in Germany

Intangible assets are regarded as the future value drivers of company performance. However hardly anything is known about the actual importance and influence of intangible assets. To fill this gap we analyze the German stock market index DAX and accomplish a survey of the German Certified Public Accountants (CPAs) concerning intangible assets in order to determine the influence of intangible assets. In a first step, we analyze the balance sheet data and the corresponding notes of the companies included in the German stock market index DAX with regard to reported values of intangible assets and applied valuation methods. The sample period covers the years from 2005 to 2007. Our results indicate that intangible assets have gained in importance, while information on valuation methods is still scarce. In a second step we analyze the estimations of the German CPAs with regard to intangible assets. Therefore we sent a standardized questionnaire to all 180 offices of the top ten (in terms of revenue) German auditing firms. According to the German CPAs the current influence of intangible assets on firms' performance is on a high level and even will increase during the next few years. The mostly used valuation approach for the fair value measurement of patented technologies is the income approach. Furthermore the accounting standards leave room for accounting policy, which casts doubt on the reliability of financial statements