Intangible assets play an increasingly important role in a global economy that sees virtually every sector digitising, moving online or adopting technology to remain competitive. The overall global value of intangibles is now estimated to exceed that of tangible assets. And yet, no nation has adopted a framework for enterprises to disclose and value their intangibles.

Singapore’s Accounting and Corporate Regulatory Authority (ACRA)and the Intellectual Property Office of Singapore (IPOS) launched a public consultation on a proposed intangibles disclosure framework (Framework) on 14 December 2022. The Framework is an element of the Singapore Intellectual Property Strategy 2030, a 10-year roadmap for the nation to become a global hub for intellectual property and other intangible assets.

The objective of the Framework is to enable enterprises to disclose information about their intangibles in a standardised and transparent way, which will support better informed assessments of the enterprise’s intangibles, more meaningful comparisons with the intangibles of other enterprises and, ultimately, improved commercialisation and financing for intangible assets generally.

The Framework defines an intangible as “a non-monetary resource that manifests itself by its economic properties; it does not have physical substance but grants rights and/or economic benefits to its owner”.  That broad definition encompasses not only intellectual property intangibles like patents, copyrights and trade marks but also intangibles resulting from contract rights, customer relationships and human capital.

Pillars of Disclosure 

The Framework rests on four pillars of disclosure: Strategy, Identification, Measurement and Management.

The Strategy pillar calls on enterprises to disclose the relationship between intangibles and business strategy, value creation and financial results.

The Identification pillar encourages enterprises to classify their intangibles in six categories:

• Marketing-related: e.g., trademarks, trade dress and domain names.
• Customer-related: e.g., customer lists and contractual and non-contractual customer relationships.
• Artistic-related: e.g., creative content, primarily works protectible by copyright.
• Contract-related: e.g., private commercial contracts and government concessions.
• Technology-related: e.g., patents, trade secrets, software and databases.
• Human Capital-related: e.g., competencies related to innovation, operations and leadership.

The Measurement pillar includes disclosure of the drivers and metrics by which an enterprise assesses the performance of its intangibles. Importantly, however, the Framework proposes that disclosure of the monetary value of an enterprise’s intangibles is optional.

The Management pillar calls for disclosure of an enterprise’s methods for identifying, assessing and managing the risks and opportunities of its intangibles.

Guiding Principles

The Framework is intended to supplement, not replace or supersede, existing regulatory and accounting requirements. Accordingly, the Framework does not prescribe the method for disclosures regarding intangibles — enterprises may choose to include the disclosures with existing reports or as a standalone report.

The Framework also does not dictate the format or layout for disclosing information about intangibles. Instead, the Framework sets out five guiding principles of disclosure.

• Materiality: an enterprise should focus on the intangibles that materially contribute to value creation.
• Connectivity: an enterprise should develop a narrative that links its intangibles to its strategy, business model and financial performance.
• Conciseness: an enterprise should communicate clearly and simply about its intangibles.
• Comparability: where possible, an enterprise should communicate about its intangibles in a way that enhances comparability with other enterprises; also, an enterprise’s intangibles disclosures should be consistent over time to enable comparison and evaluation of the enterprise’s progress regarding its intangibles.
• Future Orientation: an enterprise’s disclosures should articulate clearly how its intangibles will contribute to value creation in the future.

ACRA and IPOS acknowledge the Framework’s objectives may appear aspirational, but they believe now is the time to begin working towards an intangibles disclosure framework that can later serve as a base for an intangibles valuation framework.

The consultation’s public comment period closes on 28 February 2023.

Key Takeaway

As part of Singapore’s strategy to become a global hub for intellectual property and other intangible assets, its corporate and IP regulatory authorities have proposed a framework for enterprises to disclose information about their intangibles. Companies whose business models rely wholly or insignificant part on intangibles for value creation and revenue generation should evaluate the proposed framework and its potential implications for their businesses.

For More Information

OrionW regularly advises clients on matters related to company law and intellectual property.  For more information about Singapore’s company law or the protection and commercialisation of intellectual property in Singapore, or if you have questions about this article, please contact us at info@orionw.com.

Disclaimer: This article is for general information only and does not constitute legal advice.