UK companies face a practical choice between two intangible asset frameworks: IAS 38 (mandatory for UK-listed groups) and FRS 102 Section 18 (the default for UK private companies). While both draw from similar principles, they diverge in important ways — particularly around development cost capitalisation, revaluation, goodwill treatment, and disclosure requirements. For companies considering a future listing, PE exit, or transition to IFRS, understanding these differences is essential for planning and for interpreting reported intangible asset values across peer companies using different standards.
Accounting Framework
IAS 38 vs FRS 102 Section 18 for Intangible Assets
IAS 38 vs FRS 102 Section 18 for intangible assets. How full IFRS and UK GAAP differ on recognition, development capitalisation, revaluation, amortisation, and disclosure for intangible assets.
| Criteria | IAS 38 (IFRS) | FRS 102 Section 18 (UK GAAP) |
|---|---|---|
| Applicability | UK-listed groups (mandatory); others by choice | UK private companies, LLPs, charities not applying IFRS |
| Development cost capitalisation | Required if all 6 IAS 38.57 criteria are met | Choice — may capitalise if criteria met, or may adopt policy of expensing all |
| Revaluation model | Permitted if an active market exists for the intangible (very rare in practice) | Not permitted — cost model only |
| Goodwill amortisation | Not amortised under IFRS 3 — tested annually for impairment | Amortised over useful life; if not reliably estimable, max 10 years |
| Useful life assessment | Finite or indefinite — indefinite means no foreseeable limit on cash generation | Finite or indefinite — same concept but goodwill is always finite |
| Disclosure requirements | Extensive — IAS 38.118-128 requires detailed class-by-class disclosures | Simplified — proportionate to entity size and complexity |
| Impairment reversal | Permitted for intangible assets (but not goodwill) | Permitted for intangible assets and goodwill |
When to Use Each Approach
IAS 38 (IFRS)
- UK-listed companies (mandatory for group accounts)
- Companies preparing for IPO or cross-border listing
- Entities seeking maximum international comparability
- Groups with international subsidiaries already reporting under IFRS
FRS 102 Section 18 (UK GAAP)
- UK private companies not required to adopt IFRS
- Owner-managed businesses preferring simpler reporting
- Companies where goodwill amortisation is preferred (predictable charge, reduces carrying value)
- Entities where the additional disclosure burden of IAS 38 is disproportionate
Our Verdict
FRS 102 Section 18 offers simplicity and the option to amortise goodwill — which many PE-backed companies prefer for its predictable earnings impact. IAS 38 provides more detailed intangible asset information and international comparability. UK companies approaching a listing or cross-border transaction should model the impact of transitioning from FRS 102 to IFRS on their intangible asset balances, particularly the shift from goodwill amortisation to impairment-only.
Related Glossary Terms
Learn More
Ready to Value Your Intangible Assets?
Use Opagio's valuation tools to apply these methods to your own business.