Global Lens on Intangibles: ASC 805 vs IFRS 3 vs Ind AS 103

1. Introduction: Why This Matters

When companies acquire other businesses, the value isn't always in factories or inventory — it's often in ideas, relationships, and data. That's why recognizing intangible assets correctly is critical. But every region does it a little differently.

Let's explore how the US (ASC 805), international markets (IFRS 3/IAS 38), and India (Ind AS 103/38) approach this.

2. What Are These Standards?

🔹 ASC 805 – Business Combinations (US GAAP)

Governs how acquirers recognize assets, liabilities, and non- controlling interests.

Focuses on fair value allocation.

Explicit about recognizing identifiable intangibles separately from goodwill.

Common in the US for public companies, MNCs, and SEC

registrants.

🔹 Ind AS 103 & Ind AS 38 – Indian GAAP

Based on IFRS, with specific modifications for Indian regulatory and legal environments.

Adopted by Indian listed companies, banks, large unlisted companies.

🔹 IFRS 3 & IAS 38 – International Reporting

IFRS 3 applies to business combinations; IAS 38 governs intangible assets in general.

Globally used: EU, UK, Middle East, parts of Asia and Africa.

Similar to ASC 805 but more judgment-based in some areas.

3. Applicability Across Regions

While ASC 805 (US GAAP) sets the benchmark for acquisition accounting in US GAAP – SEC registrants, US- headquartered firms, IFRS (IAS 38 + IFRS 3) in Europe and Globally and Multinational companies outside the US and Ind AS (Ind AS 38 + Ind AS 103) in Indian listed companies, large private companies. They each aim to:

Ensure consistency and comparability across M&A transactions.
Avoid underreporting of key intangible drivers like brand value, software, or user base.
Break down the purchase price into identifiable assets for transparency.

4. Recognition Criteria

All three standards generally agree on the recognition principles but differ subtly in implementation.

Criteria for Recognition	ASC 805	IAS 38	Ind AS 38
1. Probable future economic benefits	✅	✅	✅
2. Asset is identifiable (separable or contractual)	✅	✅	✅
3. Measurable reliably at fair value	✅	✅	✅
4. Acquired in a business combination	✅	✅	✅

5. Key Differences – Deep Dive

Area	ASC 805 (US GAAP)	IFRS 3 / IAS 38	Ind AS 103 / 38

R&D Recognition	Recognized if it meets separability/contractual tests	Usually expensed unless acquired	Similar to IFRS, with industry- specific notes
Internally Generated Intangible	Not recognized pre- acquisition	Generally not recognized	Not recognized
Measurement of Goodwill	Residual after FV allocation	Same	Same
Contingent Consideration	Recognized at fair value with changes to P&L	Same, but adjustments in OCI possible	May differ depending on RBI/SEBI
regulation
Bargain Purchase	Gain immediately
recognized in P&L	Requires reassessment and then gain in P&L	Same
Revaluation Model	Not permitted	Permitted under IAS 38 (not IFRS 3)	Not permitted

6. Why Understanding These Differences Matters

Multinational deals require careful navigation of local and international standards. Misjudging even small differences in intangibles can:

Impact reported earnings Misstate goodwill
Affect investor confidence
Misalign with tax/regulatory treatment

So whether you're working on a cross-border acquisition or reporting to multiple regulatory bodies, mastering these frameworks gives you an edge.