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Corporate Governance: The International Journal of Business in Society
IAS-38 disclosure compliance and corporate governance: evidence from an emerging market
Ben Kwame Agyei-Mensah,
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Ben Kwame Agyei-Mensah, (2019) "IAS-38 disclosure compliance and corporate governance: evidence from an emerging
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IAS-38 disclosure compliance and
corporate governance: evidence from
an emerging market
Ben Kwame Agyei-Mensah
Abstract Ben Kwame Agyei-Mensah

Purpose – This paper aims to investigate the possible corporate governance attributes that can is based at the Department
influence companies in Ghana to disclose intangible assets in their annual reports to stakeholders. of Finance and Accounting,
Design/methodology/approach – A data set from 110 firms in Ghana for the year ending of 2016 was Solbridge International
used. Each annual report was individually examined and coded to obtain the disclosure of intangible asset School of Business,
information index. Descriptive analysis was performed to provide the background statistics of the variables Daejeon, Republic of
examined. This was followed by regression analysis, which forms the main data analysis method. Korea.
Findings – A large proportion of companies disclosed that the useful lives of intangible assets (either
acquired or internally generated) are finite and also disclosed their useful lives or the amortisation rates
used. Auditor type, industry type and leverage were the factors influencing the compliance with IAS 38
disclosure requirements.
Originality/value – This is the first study in Ghana that considered the impact of corporate governance
factors on IAS 38 information disclosures. This study contributes to the literature on the relationship
between corporate governance and disclosure by showing that the disclosure of intangible asset
information in Ghana is associated with Auditor type, industry type and leverage.
Keywords Corporate governance, Intangible assets, Mandatory disclosure, IAS 38
Paper type Research paper
1. Introduction
This study investigates the possible corporate governance attributes that can influence
companies in Ghana to disclose intangible assets in their annual reports to stakeholders.
International Accounting Standard (IAS, 38), require business organizations to recognize
intangible assets in their statement of financial position. The author chose to analyze the
requirements of IAS 38 because of the importance of assessing and reporting intangible
assets to the users, on one hand, and the interest showed lately by the studies on IFRS
implementation on the other hand. It is expected that entities disclose detailed information
on intangible assets, in the context of their increasing importance. IAS 38 is one of the most
innovative standards both in theory and in terms of performance impact (Teodori and
Veneziani, 2010). Patel and Narain (2009) posit that firms with higher levels of intangible
assets fared better during the recent financial crisis.
Mobus (2005) argues that mandatory accounting disclosures are a potential tool of public
policy. Intangible assets are those assets which cannot be seen, touched, or felt, as it does
not have any physical form, etc. Disclosure of intangible assets on the assets side of the
Received 11 December 2017
statement of financial position can add value to the company’s net worth. Furthermore, it Revised 24 August 2018
29 October 2018
has been observed that more often than not, a company’s market value is usually greater 6 November 2018
than its book value and the disparity can be attributed to the non-disclosure of intangible Accepted 17 December 2018
DOI 10.1108/CG-12-2017-0293 © Emerald Publishing Limited, ISSN 1472-0701 j CORPORATE GOVERNANCE j

assets in the company’s statement of financial position (Bukh et al., 2005). According to
Jose et al. (2010), one of the components that must have adequate disclosure is intangible
assets. In their opinion, the traditional accounting system does not fully reflect the value
relevance of all productive assets that generate substantial income for the organization.
IAS 1 provides a concrete signal of the transition to International Financial Reporting
Standards (IFRSs). In other words, once management changed to IFRSs, it must “make an
explicit and unreserved statement of such compliance in the notes.” (IAS1 § 16). In spite of
the adoption of the revised IAS 1 which states, “An entity shall not describe financial
statements as complying with IFRSs unless they comply with all the requirements of IFRSs”.
Recent research provides considerable evidence of non-compliance with IAS/IFRS for firms
claiming to have adopted the international accounting standards (Akhtaruddin, 2005;
Glaum et al., 2013; Tsalavoutas et al., 2014).Larson and Street (2004) found that although
many large companies from all over the world claim that their financial statements are
prepared in accordance with IFRSs, the reality is different.
Even in countries where enforcement is very strong, like the USA, non-compliance with
mandatory disclosure requirements is evident (Robinson et al., 2011; Ayers et al., 2015).
The study seeks to answer the following questions:
Q1. To what extent do firms listed on the GSE comply with risk disclosure requirements of
IAS 38?
Q2. What are the significant factors influencing the level of compliance with IAS 38
disclosure requirements in the annual reports of firms listed on the GSE?
While most developed countries have been the focus of studies on Intangible Assets
disclosure practices in their domestic markets in recent years, there have been few studies
that focus on corporate reporting practices in emerging markets (Leventis and Weetman,
2004; Belal, 2001). Thus, there is a complete dearth of literature in this area of accounting
especially in Sub-Saharan Africa. To this end therefore, this study intends to fill this gap in
the literature using data from Ghana. Drawing inspiration from previous research from
developed nations and agency theory, this paper intends to examine compliance with IAS
38 by firms in Ghana a developing country, which adopted the IFRS in 2007. This is done
with a view to finding whether or not financial statements of firms in Ghana, listed and non-
listed, can be relied upon to provide the needed transparency and comparability in this
globalised market. To the best of the author’s knowledge, this is the first work to examine
compliance with IAS 38 by firms in Ghana.
In Ghana, though there are regulations that seek to ensure good corporate governance, the
regulators are not able to enforce the regulations due to several factors. According to
Agyeman et al. (2013), though Ghana has sufficient laws and regulations with respect to
corporate governance, the major challenge is the absence of active devices for their
effective enforcement, thus leaving Ghana deficient in corporate governance practices.
According to Agyemang and Castellini (2015), a lack of good corporate governance in
state-owned corporate organisations in Ghana has led to abysmal performance and failure
of these corporate organisations.
This study contributes to the literature on intangible assets at it provides country-specific
evidence on the level and determinants of IAS 38 disclosure compliance. To date, country-
specific level and determinants of IAS 38 disclosure compliance on the African continent is
scanty and this research is conducted to fill the gap.
Second, by providing evidence on recognition and disclosure of intangible assets, this
study contributes to the ongoing debate between actors asking for more recognition and
disclosure related to intangible assets (Lev, 2008) and actors who believe the status quo is
perfectly adequate for the accounting treatment of intangibles to achieve its stated purpose
(Skinner, 2003).
j CORPORATE GOVERNANCE j
In 2013, the IASB started a project, called “Disclosure Initiative”(made up of a number of
implementation and research projects) to improve the disclosure usefulness. This research
contributes to this debate by analyzing the level of compliance with intangible assets
mandatory disclosure by firms in Ghana.
The study found that a large proportion of companies disclosed that their intangible assets
(either acquired or internally generated) have finite useful life. However, a large proportion
of the sample firms do not disclose the line item(s) of the income statement in which any
amortisation of intangible assets is included. Auditor type, industry type and leverage were
the factors influencing the compliance with IAS 38 disclosure requirements.
This paper is organised in five sections. Section 1 is the introduction and Section 2 deals
with the theoretical underpinnings and review of literature relevant to IFRS compliance.
Section 3 discusses the methodology; Section 4 is the study’s findings and analysis, while
the last section concludes the paper.
2. Theoretical framework and literature review

2.1 Disclosure theories
Three theories have been used to explain the disclosure of information in corporate reports:
agency theory, signalling theory and legitimacy theory. According to agency theory, a
company with high agency costs will try to reduce them by increasing the extent of
voluntary disclosure and using “intensive” monitoring devices, like the presence of outside
directors on a corporation’s board. Agency theory postulates that companies tend to
disclose more information voluntarily in order to reduce the agency costs that arise from
conflicts between managers and stockholders (Alves et al., 2012; Zayoud et al., 2011).
Researchers like Jensen and Meckling (1976), Chow and Wong-Boren (1987) and Hossain
et al. (1995) have also argued that the agency theory may explain why managers voluntarily
disclose corporate information. Under the signalling theory, developed by Spence, financial
reporting is said to stem from management’s desire to disclose its superior performance,
where good performance will enhance the management’s reputation and position in the
market for management services and good reporting, which include disclosing voluntary
information and is considered as one aspect of good performance. The proponents of
signaling theory suggested that information asymmetry could be reduced by sending
signals to interested parties (Yi et al., 2011).
Legitimacy theory is based on the notion of a contract between a firm and its stakeholders
on the premise that firms signal their legitimacy by disclosing certain information in the
annual report, according to Shocker and Sethi (1974). This paper uses agency theory to
study the relationship between corporate governance attributes and compliance with IAS
38 requirements.
2.2 Overview of IAS 38

Financial reporting of intangible assets is the subject of a debate between advocates for an
increase in mandatory disclosures and broader recognition of internally developed
intangible assets (Canibano et al., 2004; Lev, 2008), and defenders of the present rules
which rely mainly on voluntary disclosures with limited recognition of intangible assets
(Penman, 2009; Skinner, 2003).
Ghamari et al. (2012) in their study described intangible assets as assets that are latent,
non-monetary and do not have a physical nature, while IAS 38 defines intangible assets as
assets that are identifiable, non-monetary assets, and without physical substance. The
standard asserts that intangibles should be recorded and recognized if they fall within the
bounds of the definition given and if the assets meet the recognition criteria. The recognition
criteria is twofold, namely, the probabilities that the expected future economic benefits
attributable to the asset will flow to the entity; and that the cost of the asset can be
measured reliably (par 18-23). Separate paragraphs of the standard provides criteria by
which intangible assets can be recognized; separate acquisition (par. 25-32), as part of a
business combination (par. 33-43), by way of government grant (par.44), internally
generated (par. 51-87).
IAS 38 explicitly states that internally generated goodwill shall not be recognised as an
asset because it is not an identifiable resource controlled by the entity that can be
measured reliably at cost. IAS 38 requires companies to provide a series of disclosures.
According to IAS 38 (par.118), an entity shall disclose the following for each class of
intangible assets, distinguishing between internally generated intangible assets and other
intangible assets.
According to IAS 38 (par. 88) an intangible asset can have a finite useful life or an indefinite
useful life. If the useful life is finite, the intangible asset is amortised (IAS 38, par. 97-106)
and is tested for impairment only when there are indications of impairment. If the useful life
is indefinite, the intangible asset is not amortised and is tested for impairment annually.
2.3 Determinants of intangible asset disclosure and hypotheses development

According to Cormier et al. (2010), the extent of disclosure and some board characteristics
reduce information asymmetry. There are numerous determinants or motives for firms’
disclosure of intangible assets in their annual financial reports. In this sub-heading, a review
of literature on some of the popular determinants which includes institutional ownership,
board size, board independence (proportion of non-executive/independent directors),
board ownership concentration, board gender diversity, auditor type and industry type, is
given. These variables and their relationship with intangible asset disclosure as discussed
below.
2.3.1 Board independence (proportion of non-executive/independent directors). Non-

executive/independent directors are members of companies’ boards who are not used by
the firm. They are there to act as a control mechanism, as they perform an independent
monitoring function. According to Abor and Biekpe (2007), the proportion of non-executive/
independent board members on the board is important in explaining the firm’s
performance. Based on the argument of agency theory that having more independent
directors on the board provides more power to monitor management to disclose more
information.
The empirical results on the relationship between board independence and corporate
disclosure are mixed. For example, Song and Windram (2004) and Uzun et al. (2004) found
that independent board committees lower the level of both financial reporting problems and
corporate fraud. Most of the extant evidence indicates that voluntary disclosure increases
with the number/proportion of independent directors on the board (Cheng and Courtenay,
2006; Patteli and Prencipe, 2007; Lim et al., 2007; Donnelly and Mulcahy, 2008). Cheng and
Courtenay (2006) suggest that board independence is positively associated with voluntary
disclosure, the effect being highly significant for firms with boards dominated by a majority
of independent directors. Sun et al. (2012) argued that if the number of independent
directors is increased then firm is more likely to disclose its voluntary information. Zadeh
et al. (2018) found that there is a relationship between non-executive members and
voluntary disclosure by internet financial reporting. Torchia and Calabrò (2016) found a
positive and significant relationship between the independent directors’ ratio and the level
of financial transparency and disclosure.
These findings are consistent with agency theory tenets where a higher proportion of
independent directors enhances voluntary financial reporting (Barako et al., 2006).
However, there is also evidence of no significant positive relationship between the
proportion of independent directors on the board and the extent of voluntary disclosure (Ho
and Wong, 2001; Haniffa and Cooke, 2002) and even of higher number of independent
directors reducing voluntary disclosure (Eng and Mak, 2003; Gul and Leung, 2004; Barako,
2007). From the literature reviewed, the following hypothesis will be tested:
H1. There is a positive relationship between board independence and disclosure of firm’s
intangible asset.
2.3.2 Board size. Agency theory stresses that board independence has a positive effect on
board effectiveness (Huse, 2000). According to Fama and Jensen (1983), monitoring and
controlling management actions are the most important functions of the board of directors.
In addition, increasing the number of board members improves the capability of the board
in monitoring and controlling management actions, thus enhancing the transparency and
the disclosure of more information by management (Gandia, 2008). When the agency
problem arises in companies, which can affect firm intangible assets value, corporate
governance may play an important role in monitoring (Lins and Lemmon, 2003). These
monitoring mechanisms are usually based on the board of directors (Xie et al., 2003;
Larcker et al., 2007) as they are charged with monitoring management to protect
shareholders’ interests and avoid intangible assets being entrenched. The empirical
evidence on the association between board composition and voluntary disclosure is

inconclusive. Researchers have examined the role played by certain characteristics of the
board of directors (size and structure) in improving the disclosure quality and quantity
(Barako et al., 2006; Lim et al., 2007; Donnelly and Mulcahy, 2008). However, Moradi et al.
(2012) in their research find no significant relationship between the size of the board and
earnings management. While Adams and Hossain (1998) and Cheng and Courtenay (2006)
find a significant positive association between voluntary disclosure and board composition,
Abdelsalam and Street (2007) and Eng and Mak (2003) document a negative association
between both variables. Therefore, we formulate the following non-directional hypothesis:
H2. There is a relationship between board size and disclosure of firm’s intangible asset.
2.3.3 Block holder ownership concentration. It is expected that ownership concentration will
influence the disclosure of voluntary information. Ho and Wong (2001) explain that for
companies with highly concentrated ownership, conflict of interest is not between shareholders
and managers but between majority and minority shareholders. In this situation, managers are
encouraged to act against the interests of small shareholders by withholding information.
Akhtaruddin and Haron (2010) studied the effect of ownership concentration on voluntary
disclosure, and found that ownership concentration reflects the influence of the majority
shareholders. In their study, Chau and Gray (2010) indicated that wider ownership is
positively related to voluntary disclosure. Samaha et al. (2011) find that blockholder
ownership affects level of corporate governance voluntary disclosure. Ghazali (2007) also
found that ownership by the ten largest shareholders is not statistically significant in
explaining the level of corporate social responsibility disclosure in annual reports. However,
Naser et al. (2006) could not prove the existence of a positive relationship between the
dispersion of capital and the level of voluntary disclosure.
From the literature reviewed, the following hypothesis will be tested:
H3. There is a positive relationship between block holder ownership concentration and
disclosure of firm’s intangible asset.
2.3.4 Board gender diversity. Gender diversity literature is based on the idea that women
bring different characteristics to the board which in turn make them better in monitoring
management decision-making. Jamali et al. (2007) in their study found that board diversity
results in better performance, suggesting an inclination towards reforming existing patterns
of board gender representation. Boards that include women and individuals of varying
races, ethnicities and other minority characteristics broaden a firm’s resources and
augment the range of perspectives for the problem-solving and strategic planning process
(Ruigrok et al., 2007). According to Sirinidhiet et al. (2011), women are more independent in
decision-making, less tolerant of unethical behaviour and they take lower risks. This in turn
may help them to be better monitors over managers’ decision-making including financial
reporting quality. Nielsen and Huse (2010) also posit that women on board can reduce the
level of conflict and ensure high quality of board development activities. Writing in support
of gender diversity, Francoeur et al. (2008, p. 85) stated that:
[. . .] it seems that, in today’s complex and rapidly changing business environment, when it
comes to enhancing the quality of decision making, the advantages related to the knowledge,
perspective, creativity, and judgment brought forward by heterogeneous groups may be
superior to those related to the smoother communication and coordination associated with less
diverse sets of people.
Peni and Vähämaa (2010) found that the gender of the CFO of a firm is significantly
associated to the use of discretionary accruals in that female CFOs are more likely than their
male counterparts to use income-decreasing accruals Omoro et al. (2015) found that board
diversity is associated with financial reporting quality. Bueno et al. (2018) found that gender
diversity results in an increase in voluntary disclosure of information.
From the literature reviewed, the following hypothesis will be tested:

H4. There is a positive relationship between board gender diversity and disclosure of
firm’s intangible asset.
2.3.5 Auditor type. The research findings concerning the relationship between the size of
the auditing firm and the level of corporate information disclosure are not consistent.
Bushman et al. (2004) and Francis (2004) posit that the use of larger auditors can be an
indication of higher quality audits and enhanced credibility and financial accounting
disclosures. Raffournier (1995) and Giner (1997) on the other hand do not support this
hypothesis.
It is expected that large audit firms will be more concerned about what their clients disclose.
Firms audited by big four (4) auditing firms are likely to voluntarily disclose more information
about intangible than those that are audited by non-big four (4) auditors (Karim and Ahmed,
2005; Oliveira et al., 2006). An auditor is an independent person appointed to examine the
organization records and financial statement to form an opinion on the accuracy and
correctness of the financial statement of the firms (Oladipupo, 2005). Therefore, bigger
audit firms encourage their clients to disclose more information in annual reports (Hossain
et al., 1995). Oliveira et al. (2006) argued that large auditing firms might encourage their
clients to disclose more information, as they want to preserve their reputation, develop their
expertise and ensure that they retain their clients. From the literature reviewed the following
hypothesis will be tested:
H5. There is a positive relationship between auditor type and disclosure of firm’s
intangible asset.
2.3.6 Industry type. Membership of a given industry is argued to affect levels of voluntary
disclosure through political cost, signaling, proprietary cost, and legitimacy theory. Firms
belonging to industries with high levels of intangibles are likely to voluntarily disclose
information about intangible (Oliveira et al., 2006, p. 16). The level of intangible assets
voluntary disclosure is higher for emerging market companies in either IT-related or
consumer services and product industries (Kang and Gray, 2006). Also in their work,
industry type is considered from the IA perspective. IA relating to technology and brand
names are arguably the most important, or at least the best known, specific assets which are
intangible (Barth et al., 2001). For example, previous literature has found that companies
operating in high-tech industry sector (information technology/telecommunications services)
recognize more technology-related expenses and R&D. On the other hand, in the consumer
product industry sector, brands are regarded as a key competitive factor, which influences
consumer preferences for a product and therefore the sales of the company (Stolowy et al.,
1999), and subsequently are disclosed more often by companies in the consumer product
sector. Studies by Bozzolan et al. (2003), Petty and Cuganesan (2005) and Oliveira et al.
(2006) found positive but not significant relationship between intangible assets intensiveness
and voluntary disclosure of intangible asset of intellectual capital. From the literature
reviewed the following hypothesis will be tested:
H6. There is a positive relationship between firms operating in high-tech industry sector
and consumer product sector and disclosure of firm’s intangible asset.
3. Method
3.1 Sample
The researcher collected both corporate governance and firm-specific data from annual
reports of 110 companies. The sample companies comprise 36 listed firms and 74 non-
listed firms. The non-listed firms were selected from year 2015 and 2016, top 100 firms in
Ghana (“Ghana Club 100” based on size and performance). Data from top 100 firms in
Ghana have been used by Agyei-Mensah (2016) in his earlier study. These 110 firms are
purposely selected due to data availability. Annual reports for the financial year 2016 were
used for the analysis. The year 2016 was chosen because this is the recent financial reports
available. The focus on only one year is justifiable, given the presence of a well-
documented argument in earlier studies that companies, in general, have a tendency to
preserve the same relative level of disclosure policies over time (Kamel and Shahwan,
2014).
3.2 Measurement of dependent and independent variables

Disclosure of intangible asset information (DIAI) is the dependent variable in the current
study. To determine the extent of intangible asset information disclosure, data were
manually extracted from the annual reports of the 110 firms used in the study. Content
analysis and design of evaluation criterion were used to calculate the intangible asset
disclosure index. Many researchers have used a disclosure index for examining the
disclosure practices for intangibles of selected companies (Williams, 2001; Citron et al.,
2005; Bergamini and Zambon, 2005; Kang, 2006). For the purpose of this study, the KPMG,
2016 IAS-38 disclosure checklist is used (see Appendix). This checklist is based on the
IAS-38 disclosure requirements and has been used by Tsalavoutas et al. (2014).
For the purpose of this study, dummy variables were assigned to represent whether an item
is disclosed; if an item is disclosed, then 1 is assigned to that item and 0 if an item is not
disclosed used (Johnson et al., 2001; Celik et al., 2006; O’Sullivan et al., 2008; Uyar and
Kilic, 2012). The values assigned are then summed up to represent the total score for each
company. This is mathematically presented as follows:
The voluntary disclosure index = Total voluntary information items disclosed/Maximum (40)
items disclosed for each company. This can mathematically be stated as follows:
Actual disclosure
Intangible Asset Disclosure Index ¼
Total possible disclosure ð20Þ
Xm
di
1
¼
X
n
di
1
where:
di = 1 if the item di is disclosed (0 if not disclosed);
m = number of items disclosed; and
n = maximum number of disclosure items possible.
3.3 Model development

Based on prior empirical research, five corporate governance mechanisms are included in
the study model. These are board size, non-executive directors, block ownership
concentration, board gender diversity, industry type and auditor type. There are also four
control variables: profitability, liquidity, leverage and auditor type. The independent variables
and their definitions and proxies used in this study are presented in Table I:
IAID ¼ b 0 þ b 1 BODS þ b 2 PNED þ þ b 3 BOC þ b 4 BDG þ b 5 AUDT þ b 6 IND

þ b 7 PROF þ b 8 LEV þ b 9 LIQDT þ «
where:
IAID = Intangible asset information disclosure;

b0 = Regression coefficients;
BODS = Board size;
PNED = Proportion of non-executive/independent directors;
BOC = Board ownership concentration;
FSIZE = Board gender diversity;
AUDT = Auditing firm;
IND = Industry type;
LEV = Firm financial leverage;
PROF = Firm profitability;
LIQDT = Firm liquidity; and
e = error term.
Table I The deﬁnitions and proxies of study variables

Variable Symbol Definition/proxy
Board independence PNED The proportion of non-executive/independent directors to total number of board members
Board size BDS Total number of directors on the board
Board gender diversity BDG The proportion of female directors on the board
Industry type IND The type of industry the firm is operating under. Dummy variable: 1 if the firm belongs to a high
intangibles intensive industry(e.g. high-tech industries and consumer product sector);0 if
otherwise
Block ownership concentration BOC Total shareholding of top 20 shareholders divided by the total number of shares outstanding
Leverage LEV Ratio of non-current liabilities to shareholder’s equity
Liquidity LIQ Ratio of current assets/current liabilities
Profitability ROA Net income/total assets
Auditor type AUDT The type of auditing firm providing service to the firm. Dummy variable: 1 if a big 4 auditor; 0 if
otherwise
4. Results and discussion
4.1 Levels of IAS 38 compliance
Intangible assets in the statement of financial position of the sample firms refer to computer
software. They are stated as either internally generated or bought from outside the firm.
Table II indicates that the average IAS 38 compliance level of selected companies is 61
per cent. The implication is that the firms are not fully complying with IAS 38 disclosure
requirements. This finding is consistent with (Akhtaruddin, 2005; Glaum et al., 2013;
Tsalavoutas et al., 2014) who stated that there is considerable evidence of non-compliance
with IAS/IFRS for firms claiming to have adopted the international accounting standards.
Tables III and IV provide an analysis of the percentage of companies that disclose
information that complies with IAS 38 disclosure requirements. Table III provides the level
with which companies respond to each individual sub-paragraph of IAS 38 when their
financial statements indicate that they do have internally generated intangible assets. The
Table II Descriptive statistics

Descriptive statistics Mean SD Maximum Minimum
BODS 8 1.85 12 4
PNED (%) 70 14 90 30
AUDT (%) 0.97 0.16 1.00 0.00
BGD (%) 16 10 60 0.00
BOC (%) 84.56 10.59 97.10 55.00
IAID (%) 61 11 70 50
PROF (%) 6.20 8.29 33.00 8.00
LEV 1.4 2.8 21.1 0
LIQ 2.14 2.32 16.9 0.1
IND (%) 0.68 0.47 1.00 0.00
Table III Provision of the information required by paragraph 118 of IAS 38 (regarding internally generated
intangible assets)
Firms disclosing
Disclosure required information (%)
The amortisation methods used for intangible assets with finite useful lives 6/10 (60)
The gross carrying amount and any accumulated amortisation (aggregated with accumulated impairment
losses) at the beginning and end of the period 6/10 (60)
The line item(s) of the income statement in which any amortisation of intangible assets is included 2/10 (20)
A reconciliation of the carrying amount at the beginning and end of the period 6/10 (60)
Table IV Provision of the information required by paragraph 118 of IAS 38 (regarding acquired intangible assets)
Disclosure by firms:
Disclosure required no. (%)
Whether the useful lives are indefinite or finite and, if finite, the useful lives or the amortisation rates used 104/107 (97.2)
The amortisation methods used for intangible assets with finite useful lives 104/107 (97.2)
The gross carrying amount and any accumulated amortisation (aggregated with accumulated impairment losses)
at the beginning and end of the period 104/107 (97.2)
The line item(s) of the income statement in which any amortisation of intangible assets is included 34/107 (31.8)
A reconciliation of the carrying amount at the beginning and end of the period 97/107 (90.6)
analysis reveals that this type of information is relevant in 10 out of the 110 companies. The
information indicates that 80 per cent of the 10 companies do not disclose the line item(s) of
the income statement in which any amortisation of intangible assets is included.
Table IV provides the corresponding information for 107 companies (out of the 110) whose
financial statements indicate that they have acquired intangible assets. The information
presented in Table IV reveals that a large proportion of firms for which this information is
relevant (about 68.2 per cent out of the 107), do not disclose the line item(s) of the income
statement in which any amortisation of intangible assets is included.
Beyond the above disclosures, paragraph 122 of IAS 38 requires further information to be
disclosed, where relevant. Sub-paragraph (a) requires a firm with an intangible asset that is
assessed as having an indefinite useful life to disclose the carrying amount of that asset and
the reasons supporting the assessment of an indefinite useful life. Additionally, the entity
shall describe the factor(s) that played a significant role in determining that the asset has an
indefinite useful life. Analysis reveals that all the 110 companies indicated that their
intangible assets have finite useful life.
Finally, the research could not identify any firm that is following the revaluation model for the
measurement of intangible assets after recognition. All companies follow the cost model for their
measurement. As a result, the disclosures required in paragraph 124 of IAS 38 are not relevant
for the sample firms. This finding is consistent with the findings of Tsalavoutas et al. (2014).
4.2 Univariate analysis

To match the requirements of the regression analysis assumptions, correlation between the
study variables was undertaken. The correlation analysis (Table V) shows that LEV has a
significant relationship with LIQ at 1 per cent level (p = 0.000).
IAID has a significant relationship with AUD at 1 per cent (p = 0.000) and LEV at 1 per cent
(p = 0.000). LIQ also has a significant relationship with LEV at 1 per cent level (p = 0.000).
These results indicate the need to pay attention to possible multi-colinearity problem in the
regression analysis.
4.3 Multicollinearity and autocorrelation tests

A regression analysis (Table VI) was performed on the dependent and independent variables
to check on the existence of the multi-colinearity and serial or autocorrelation problems. The
tolerance and variable inflation factor (VIF) tests revealed no harmful correlation. According to
Pallant (2005), Field, 2009; Neter et al., 1996), if the largest VIF is greater than 10, there is
cause for concern. However, the maximum VIF value in Table VI is 1.577 and Durbin–Watson
value of 1.189. In addition, the tolerance is greater than 0.20 for the variables (the smallest
tolerance is 0.592). Therefore, this study is not subject to high colinearity problems. Overall,
there are no linearity, multicollinearity, and autocorrelation problems.
4.4 Determinants of IAS 38 disclosure compliance

The regression results of the determinants of timeliness of financial reporting are shown in
Table VII.
Table VII indicates that PNED has a positive relationship with IAID but statistically
insignificant at 0.05 level in all the three columns. Thus, H1 is not supported, hence rejected.
Table VII presents the regression results. Column 1 provides results for listed firms, Column
2 examines the results for non listed firms and Column 3 presents results for the entire
sampled firms.
Table V Spearman’s rho correlation
Correlations results BODS PNED AUDT BGD BOC IAID PROF LEV LIQ IND
BODS
Correlation coefficient 1.000
Sig. (two-tailed)
PNED
Correlation coefficient 0.059 1.000
Sig. (two-tailed) 0.540
AUDT
Correlation coefficient 0.119 0.077 1.000
Sig. (two-tailed) 0.216 0.426
BGD
Correlation coefficient 0.145 0.186 0.056 1.000
Sig. (two-tailed) 0.132 0.052 0.563
BOC
Correlation coefficient 0.014 0.045 0.140 0.070 1.000
Sig. (two-tailed) 0.888 0.643 0.145 0.467
IAID
Correlation coefficient 0.064 0.005 0.620 0.119 0.059 1.000
Sig. (two-tailed) 0.507 0.958 0.000 0.217 0.540

PROF
Correlation coefficient 0.216 0.049 0.043 0.016 0.068 0.042 1.000
Sig. (two-tailed) 0.024 0.612 0.653 0.866 0.477 0.659
LEV
Correlation coefficient 0.101 0.147 0.101 0.130 0.172 0.174 0.051 1.000
Sig. (two-tailed) 0.293 0.125 0.293 0.174 0.072 0.069 0.599
LIQ
Correlation coefficient 0.027 0.183 0.064 0.032 0.115 0.000 0.018 0.638 1.000
Sig. (two-tailed) 0.778 0.056 0.505 0.743 0.233 0.096 0.850 0.000
IND
Correlation coefficient 0.140 0.046 0.005 0.041 0.010 0.006 0.117 0.168 0.026 1.000
Sig. (two-tailed) 0.144 0.634 0.955 0.672 0.919 0.949 0.223 0.079 0.786
Notes: Correlation is significant at the 0.05 level (two-tailed); correlation is significant at the 0.01 level (two-tailed)
Table VI Multicollinearity and autocorrelation tests

Variables Tolerance VIF
(Constant)
BODS 0.795 1.258
PNED 0.943 1.061
AUDT 0.946 1.057
BDG 0.803 1.246
BOC 0.634 1.577
PROF 0.927 1.078
LEV 0.919 1.088
LIQ 0.887 1.127
IND 0.944 1.059
The results indicate that BODS has a positive relationship with IAID but statistically
insignificant in all the three columns. Thus, H2 is not supported hence rejected.
BOC has a positive relationship with IAID but statistically insignificant in all the three
columns. Thus, H3 is not supported hence rejected.
Table VII Multivariate regressions results
(1) Listed firms coefficient (2) Non listed firms coefficient (3) All firms coefficient
Independent variables (t-statistics) (t-statistics) (t-statistics)
Constant 0.136 (0.596) 0.471 (0.238) 0.259 (0.127)

BODS 0.185 (0.900) 0.079 (0.631) 0.067 (0.621)
PNED 0.165 (0.869) 0.149 (1.184) 0.040 (0.410)
AUDT 0.030 (0.151) 0.101 (0.802) 0.017 (0.062)
BDG 0.088 (0.465) 0.187 (1.428) 0.016 (0.134)
BOC 0.129 (0.679) 0.002 (0.018) 0.094 (0.938)
PROF 0.056 (0.283) 0.144 (1.201) 0.172 (1.702)
LEV 0.096 (0.492) 0.239 (1.890) 0.177 (0.749)
LIQ 0.251 (1.215) 0.010 (0.073) 0.001 (0.009)
IND 0.279 (1.346) 0.126 (1.066) 0.065 (0.659)
Adj. R2 0.341 0.213 0.233
F value 4.426 4.382 4.456
N= 36 74 110
Durbin–Watson 1.242 1.321 1.570
Notes: , , denote significance at the 10, 5 and 1% level, respectively; italic values corresponds to statistically significant results
BDG has a positive relationship with IAID ( b = 0.008) but statistically insignificant in all the
three columns. Thus, H4 is not supported hence rejected.
AUDT has a positive relationship with IAID ( b = 0.015) and statistically significant at 0.01 level
in all the three columns. Thus, H5 is supported hence accepted. The implication of the finding
is that companies audited by Big 4 companies are likely to comply with IAS 38 intangible asset
disclosure requirement. This finding is consistent with (Karim and Ahmed, 2005; Oliveira et al.,
2006) who found that firms audited by big four (4) auditing firms (i.e. high standard and well
known auditing firms in the country) are likely to voluntarily disclose more information about
intangible than those that are audited by non-big four (4) auditors. This finding is however,
inconsistent with Teodori andVeneziani (2010) who found no such relationship.
IND has a positive relationship with IAID and statistically significant at 0.05 level in all the
three columns. Thus, H6 is supported hence accepted. The implication of the finding is that
firms in high-tech industries are likely to disclose more information on intangible assets and
hence will comply fully with the IAS 38 intangible assets disclosure requirements. This
finding is consistent with (Oliveira et al., 2006) who posit that firms belonging to industries
with high levels of intangibles are likely to voluntarily disclose information about intangible.
The finding is also consistent with (Kang and Gray, 2006) who found that the level of
intangible assets voluntary disclosure is higher for emerging market companies in either
IT-related or consumer services and product industries .
With regards to the control variables LEV has a positive relationship with IAID ( b = 0.171)
and statistically significant at 0.01 level.The implication is that firms with high debts will
comply with IAS 38 disclosure requirements. This finding is in consonant with the agency
theory. Agency theory proponents argue that a company with high leverage is incentivized
to disclose more information in order to reduce agency costs, arisen from the potential size
of wealth transfer from debt holders to shareholders in line with signaling and stakeholders’
theories (Oliveira et al., 2006). The finding is inconsistent with Kang and Gray (2006) who
found a negative relationship between leverage and intangible asset disclosure.
The other control variables do not have significant relationship with IAID.
4.5 Robustness check

A time lag between measures of the explanatory factors and the DIAD is necessary
because the disclosure of intangible asset information might relate primarily to the past
release of intangible asset information. To test the robustness of the results, multiple
regression was performed for IAD by using lagged values for BODS, BOC, PNED, AUDT,
LIQ, PROF, IND and LEV of 2015. As indicated in Table VIII, the results using lagged data
appear in a pattern very similar to the original multiple regression results shown in Table VI.
5. Conclusion
This paper uses agency theory to study the relationship between corporate governance attributes
and compliance with IAS 38 requirements. A data set from 110 firms in Ghana for the year 2016
was used. Each annual report was individually examined and coded to obtain the disclosure of
intangible asset information index. Descriptive analysis was performed to provide the
background statistics of the variables examined. This was followed by regression analysis, which
forms the main data analysis method. This report provides evidence of the actual information
provided by companies in Ghana about their intangible assets. More specifically, it captures both
the accounting for and the disclosures provided by the sample firms under IAS 38.
The study found that a large proportion of companies disclosed that their intangible assets
(either acquired or internally generated) have finite useful. However, a large proportion of
the sample firms do not disclose the line item(s) of the income statement in which any
amortisation of intangible assets is included. Ghana has adopted the international financial
reporting standards (IFRS); hence, there is the need to fully comply with all the mandatory
required disclosures. The needs of users of the financial statements cannot be met if firms
only pretend to comply with the IFRS, by just stating their compliance in the notes attached
to the financial reports. The following statement can be found in the notes attached to firms’
financial reports; “The financial statements have been prepared in accordance with all
International Financial Reporting Standards, including International Accounting Standards
and interpretations issued by the International Accounting Standards Board and its
committees, as required by the Institute of Chartered Accountants (Ghana)”. From the study
it has been found that firms in Ghana do not fully comply with the requirements of IAS 38.
Auditor type, industry type and leverage were the factors influencing the compliance with
IAS 38 disclosure requirements. The use of the agency theory in this study has shown that
firms that are audited by one of the Big 4 auditing firms, and firms in the high-tech industries
(information technology/telecommunications services) are likely to comply with IAS 38
information disclosure requirements. The positive relationship between IAS 38 information
disclosure and leverage, implies that firms with high debts will comply with IAS 38
disclosure requirements. This finding is also in consonant with the agency theory.
Table VIII Regression analysis results for IAID by lagged data of 2015
Independent variables Coefficient t-statistic
BODS 0.143 0.188

PNED 0.072 0.412
AUDT 0.010 1.961
BGD 0.029 1.892
BOC 0.094 0.961
PROF 0.172 2.403
LEV 0.087 2.910
LIQ 0.077 1.780
IND 0.016 1.204
Adj. R2 0.179
F value 5.443
N= 110
Durbin–Watson 1.878
Note: , , denote significance at the 10, 5 and 1% level, respectively
This study contributes to the literature on intangible assets at it provides country-specific
evidence on the level and determinants of IAS 38 disclosure compliance. To date, country-
specific level and determinants of IAS 38 disclosure compliance on the African content is
scanty, and this research fills the gap.
There are several practical implications of the current study for academicians and
practitioners. The study contributes to the accounting literature in general, and specifically to
the literature on mandatory disclosure. Listed firms can use the findings to improve the extent
to which they are complying with the IAS/IFRS disclosure requirements. The accountancy
institutes in Ghana, the Ghana stock exchange, and SEC may use the findings of the current
study to provide guidance on best practices and training programs for the listed firms to help
improve the compliance of IAS 38 requirements. The regulators should also be interested in
the influence of corporate governance mechanisms on mandatory disclosure.
One of the limitations of the current study is that of its small sample size. The limited number
of companies makes it difficult to draw broad conclusions, so the researcher cannot
generalize the results. Further exploratory research could be undertaken to cover more
listed and non-listed firms for the results to be generalised.
Further longitudinal studies might also be conducted to investigate mandatory disclosure
patterns of companies across years. The results may differ across different years if multiple
years are considered. This study used only the annual reports of the firms as the information
disclosure source; other sources such as websites, press releases and prospectuses were
not used. Future research can be conducted using these other sources to improve the
findings. This research study adds to the prior literature by exploring the effect of firm
characteristics and corporate governance attributes on compliance with mandatory
disclosure in emerging markets. One natural extension of this research would be to conduct
a comparative study between several countries.
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Carson, E. and Simnet, R. (1997), “Voluntary disclosure of corporate governance information”,
Unpublished Working Paper, University of New South Wales, Sydney.
IAS 38 (2018), “Intangible assets”, International Accounting Standards Committee, London.

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indeveloping countries: evidence from Ghana”, Managerial Auditing Journal, Vol. 22 No. 3, pp. 319-334,
available at: http://dx.doi.org/10.1108/02686900710733170
Corresponding author
Ben Kwame Agyei-Mensah can be contacted at: bamensah@solbridge.ac.kr
Appendix
Table AI IAS 38 Intangible assets

Item Disclosure requirement Source Maximum score
General
1 Disclose the following for each class of intangible assets, distinguishing between internally IAS 38.118
generated and other intangible assets
2 a. the gross carrying amount and any accumulated amortization (aggregated with IAS 38.118(c)
accumulated impairment losses) at the beginning and end of the period
3 b. the line item(s) of the statement of profit or loss and OCI in which any amortization of IAS 38.118(d)
intangible assets in included; and
4 c. a reconciliation of the carrying amount at the beginning and end of the period showing IAS 38.118(e)
5 i. additions arising from internal development IAS 38.118(e)(i)
6 ii. additions acquired separately IAS 38.118(e)(i)
7 iii. additions acquired through business combinations IAS 38.118(e)(i)
8 iv. assets classified as held-for-sale or included in a disposal group classified as held-for- IAS 38.118(e)(ii)
sale in accordance with IFRS 5 and other disposals
9 v. increases or decreases resulting from revaluations under IAS 38.75, 85 and 86 IAS 38.118(e)(iii)
10 vi. decreases resulting from impairment losses recognized in OCI under IAS 36 IAS 38.118(e)(iii)
11 vii. increases resulting from impairment losses reversed in OCI under IAS 36 IAS 38.118(e)(iii)
12 viii. impairment losses recognized in profit or loss under IAS 36 IAS 38.118(e)(iv)
13 ix. impairment losses reversed in profit or loss under IAS 36 IAS 38.118(e)(v)
14 x. amortization IAS 38.118(e)(vi)
15 xi. the net exchange differences arising on the translation of the financial statements from the IAS 38.118(e)(vii)
functional currency into a different presentation currency, including the translation of a
foreign operation into the presentation currency of the reporting entity; and
16 xii. other changes IAS 38.118(e)
(viii)
Disclose IAS 38.122
17 a. for an intangible asset assessed as having an indefinite useful life, the carrying amount of IAS 38.122(a)
that asset and the reasons supporting the assessment of an indefinite useful life. In giving
these reasons, describe the factor(s) that played a significant role in determining that the
asset has an indefinite useful life
18 b. a description, the carrying amount and remaining amortization period of any individual IAS 38.122(b)
intangible asset that is material to the financial statements
19 c. for intangible assets acquired by way of a government grant and recognized initially at fair IAS 38.122(c)
value
20 i. the fair value recognized initially for these assets IAS 38.122(c)(i)
21 ii. Their carrying amount; and IAS 38.122(c)(ii)
22 iii. whether they are measured after recognition under the cost model or the revaluation IAS 38.122(c)(iii)
model
23 d. the existence and carrying amounts of intangible assets whose title is restricted and the IAS 38.122(d)
carrying amounts of intangible assets pledged as security for liabilities; and
24 e. the amount of contractual commitments for the acquisition of intangible assets IAS 38.122(e)
Revaluation
25 If intangible assets are accounted for at revalued amounts, then disclose IAS 38.124
26 a. by class of intangible assets IAS 38.124(a)
27 i. the effective date of the revaluation IAS 38.124(a)(i)
28 ii. the carrying amount of revalued intangible assets; and IAS 38.124(a)(ii)
29 iii the carrying amount that would have been recognized had the revalued intangible assets IAS 38.124(a)(iii)
been carried under the cost model (i.e. not revalued); and
30 b. the amount of the revaluation surplus that relates to intangible assets at the beginning and IAS 38.124(b)
end of the period, indicating the changes during the period and any restrictions on the
distribution of the balance to shareholders
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Corporate Governance: The International Journal of Business in Society

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Abstract Ben Kwame Agyei-Mensah

DOI 10.1108/CG-12-2017-0293 © Emerald Publishing Limited, ISSN 1472-0701 j CORPORATE GOVERNANCE j

2. Theoretical framework and literature review

2.2 Overview of IAS 38

2.3 Determinants of intangible asset disclosure and hypotheses development

2.3.1 Board independence (proportion of non-executive/independent directors). Non-

evidence on the association between board composition and voluntary disclosure is

From the literature reviewed, the following hypothesis will be tested:

3.2 Measurement of dependent and independent variables

3.3 Model development

IAID ¼ b 0 þ b 1 BODS þ b 2 PNED þ þ b 3 BOC þ b 4 BDG þ b 5 AUDT þ b 6 IND

IAID = Intangible asset information disclosure;

Table I The deﬁnitions and proxies of study variables

Table II Descriptive statistics

4.2 Univariate analysis

4.3 Multicollinearity and autocorrelation tests

4.4 Determinants of IAS 38 disclosure compliance

Sig. (two-tailed) 0.507 0.958 0.000 0.217 0.540

Table VI Multicollinearity and autocorrelation tests

Constant 0.136 (0.596) 0.471 (0.238) 0.259 (0.127)

4.5 Robustness check

BODS 0.143 0.188

Akhtaruddin, M. (2005), “Corporate mandatory disclosure practices in Bangladesh”, The International

Intellectual Capital, Vol. 2 No. 3, pp. 192-203.

IAS 38 (2018), “Intangible assets”, International Accounting Standards Committee, London.

Table AI IAS 38 Intangible assets

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