Stakeholders of both financial institutions and other commercial corporations, need to be informed of the credit risks faced by the reporting entity. They are served well, by recognition and commensurate disclosures, related to the expected losses to be incurred due to credit risks. It is an orchestrated attempt, within the framework of implementing Basel III, and as part of the cooperation between the Basel Committee on Banking Supervision and IASB, to apply a forward looking approach in loss recognition. Due recognition of expected credit losses, will enhance micro and macro prudential measures taken by banking supervisors, to prevent future banking and financial crises from having a similar impact as the one experienced towards the end of the last decade.
IAS 38 Intangible assets specifically disallows capitalization of advertising, promotional activities, training, and similar expenditure. From an economic point of view, these costs are deemed to be an essential part of “market building”, “profiling”, “know-how”, in order to stay ahead of the game and sustain competitive advantage. For financial reporting purposes though, as future economic benefits are difficult to monetize and the entities are not deemed to control the outcome of these investments, this expenditure is recognized in the statement of profit or loss, in the period in which it is incurred.