Why intangible assets are reshaping business valuation

Nicolas Konialidis:
The CFO, the management, auditors, valuers, everyone is coming together and talking about value in general and we're seeing that specifically around intangible assets. If you ask me what we will see in the next 12 to 18 months, we are going to see more convergence, more interaction between all of those constituencies, and we are going to see increasing transparency, I would say, around unit economics of the businesses.

Elinor Kasapidis:
Welcome to CPA Australia's With Interest. I'm Elinor Kasapidis, Chief of Policy Standards and External Affairs at CPA Australia. Today, we're diving into the topic of valuations and how it is central to many aspects of the accounting profession. Joining me today are Ram Subramanian, our external reporting policy lead, and Nicolas Konialidis, the director of the International Valuation Standards Council in Asia and technical director of the IVSC's Business Valuation Board. As a chartered financial analyst, a chartered valuer and appraiser, Nicolas has over three decades of experience in equity markets, corporate finance, and valuations in Europe, the USA, and Asia. Prior to joining the IVSC four years ago, Nicolas spent 16 years in an array of functions in Europe and the US, from trading to institutional sales for firms such as SE Banken, Crédit Agricole, and Sanford C. Bernstein. He has also been a managing director of a consultancy specialising in advising, valuing, and transacting in intangible assets. Welcome to With Interest, Nicolas and Ram.

Nicolas Konialidis:
Thank you for having me.

Ram Subramanian:
Thank you, Elinor.

Elinor Kasapidis:
Nicolas, before we get into standards and statements, take us back a bit. What were the moments in your career that really shaped how you think about value and when did you first realise that intangibles were going to be the big story?

Nicolas Konialidis:
Well, let's start about with valuations. As a junior professional during the dotcom boom, we saw many things that made absolutely no sense and in a way that was foreshadowed by Scott McNealy, who was at the time the CEO of Sun Microsystems. What he said in 2002 where he enumerated the valuation metrics and asked the investors, "What were you thinking when you were paying 10 times revenues at the time in 2000?" And it made no sense. As for intangibles specifically, this theme emerged several years ago and it became apparent while I was at Sanford Bernstein where the analysts were looking at the quality of management through the pillars of success for the companies. And this was several years ago, but the terms of the debate have sharpened incredibly since then.

Elinor Kasapidis:
So from 25 years ago, we're here now in 2026 where intangibles are the word of the moment. For listeners who may not be close to valuation standard setting, if you can explain to us what is the IVSC's role in the global financial reporting ecosystem and why is global consistency and valuation standards particularly critical in the intangible space?

Nicolas Konialidis:
Well, the IVSC is a nonprofit with a dual mission. Our boards write and promulgate the IVS, the international valuation standards, and these apply to the valuations of all assets in all circumstances for all purposes of valuations. The other thing that the IVSC does is to promote professionalism in valuations. In general, what we're seeing are more and more constituencies that are interested by valuation, whether it's the financial reporting world, which has been increasingly interested by valuations, especially with the rise of fair value measurement. Intangible assets have been one of the convergence points for this interest and the convergence point between valuation world and the financial reporting world, where we see the rise of intangible assets in the economy that has increased the gap between market valuations of listed companies, but not only and financial statement values.
So this has led some academics and investors to postulate that the rise of intangible assets has led to the loss of relevance of financial statements. That is not my view and it is not the view of the IVSC’s, but it does mean that the valuation of intangible assets is inherently difficult because of the wide range of outcomes those intangibles enable. You have a wide dispersion in possible outcomes. A technology might be worthless or it might be the next blockbuster success.

Elinor Kasapidis:
And there is a lot of discussion around the volatility of AI-led tech companies. There's talk about the AI boom and the AI bust and no one's quite sure where it's going to be. Ram, you held an intangible summit earlier this year and the framing was at its core, intangibles are now where value lives. Software, data, platforms, AI, yet the numbers and disclosures in the financial statements often lag that reality. Why is that mismatch so important these days and what's at stake for investors and boards if we keep making major capital allocation decisions with only a partial picture of where value is actually being created?

Ram Subramanian:
Because it goes straight to the quality of decisions in capital markets and in boardrooms, if value is increasingly being created through software, data, platforms, and AI, but our primary reporting model still treats a lot of that spend as just an expense in the profit loss, then investors and boards are effectively steering the ship with an incomplete dashboard. What's at stake here is capital allocation discipline. When you can't clearly see the scale and nature of intangible investment, rather it's treated as an expense. So you have a confusion between what's maintenance versus what's growth, where the real bets are being placed, how long the benefits are expected to last. You can misread performance, misprice risk, fail to see the opportunity, and misallocate capital. And that visibility into intangible value is not just a challenge faced by investors and other externals, it's a challenge for boards as well. Boards that actually make decisions around investments within the business. If they don't have clarity, a vision into how value is going to be created through technology related assets or projects, they can't see where a return on investment is, they may hesitate to put money into these projects.
Now, there's a flip side to this and this is what we commonly refer to as the hype cycle problem. Anecdotally, we are hearing about companies putting money into AI and other tools without actually having a clear vision or visibility into what it's going to do for them. What's the benefit for them out of these investments? So once again, no value demonstration, but just following the crowd. So the message was clear from our summit. Businesses need better corporate reporting solutions to demonstrate how value is being created through investments in technology and those solutions are not just about financial reporting standards. I think that's quite an important message. It's broader than that. And although some answers may come from improved financial reporting standards, we do need to look at this challenge more holistically and find solutions that go beyond financial reporting. So it could lie in sustainability reporting, it could lie in management reporting, other types of reporting which is not necessarily constrained by financial reporting.

Elinor Kasapidis:
Nicolas, turning to you, the IVSC’s onto this issue with its recent focus on intangible assets. You have a perspectives piece, "Making Intangibles More Tangible.” What are the practical barriers that you are seeing in the real world about assets, the boundaries between intangibles and goodwill, and some of the other elements that people are grappling with?

Nicolas Konialidis:
So the series of perspective papers you reference are not authoritative. They seek to inform the debate around intangible assets. That is distinct from the international valuation standards which are authoritative and are really the framework whereby you would conduct a valuation. So the IVSC's focus on intangible assets mirrors the multiple constituencies that are interested in this topic. For instance, policymakers are interested for many reasons, but one of those reasons is to unlock intangible assets for financing. The other set of interested parties are investors who want a better view on intangible assets to inform their capital allocation decisions, as Ram said earlier. And there are many other constituencies too. Of course, financial reporting is an important, intended use for valuations too. The IVS are always compatible with other laws, regulations, and indeed with other standards such as the financial reporting standards, and they aim to provide the framework for applying financial reporting standards and conducting good valuations when those valuations are required.
So, to go back to your question, we can see that the intangible assets are becoming increasingly a topic of interest, and we know also that the IASB is currently reviewing the standards that look at intangible assets. The IVSC engages on a regular basis with the IASB when it comes to all sorts of topics, including their current revision of the standards that concern intangible assets. And the series of perspective papers looks to inform that debate. We started off with the observation around this possible loss of relevance of financial statements. And then we went and we examined in a series several of the type of intangible assets, including those that are not often recognised or measured in financial statements, whether it was brand value, whether it's human capital, whether it's technology, data and customer relations. And what we've seen has been the emergence of new techniques to value these assets.
And these new techniques are not always permissible under financial reporting standards for absolutely legitimate reasons. What we try to do with the IVS is to make sure that the standards provide that framework whereby regardless of the constraints, whether they're for financial reporting or for other intended use, the user of the valuation will understand how the valuation has been conducted and how the conclusion of value has been reached. That's as much as we can do or as much as we want to do when it comes to intangible assets. And frankly, on a personal note, examining these various intangible assets was really very, very interesting. We got to engage with all sorts of stakeholders, with investors, with academics, with other standard setters. It was a fantastic endeavour and these papers are available on the IVSC website.

Ram Subramanian:
Thanks for that, Nicolas. I want to add a little bit to that as well. I think if you think about what's the next big thing for the International Accounting Standards Board, in my mind, without doubt, it's got to be the intangibles topic and they recognise that. So they've got a project looking into this and it's currently in its research phase, which is fair enough, because there's a lot of work to be done to understand what the underlying economic activities are that need to be reflected in accounting. So these are all the questions that the IASB is currently dealing with at the moment. If you think about the standard that's currently in place, it was issued in 1998.
So the IAS 38 was issued in 1998. It was based on research conducted by the standards that are at that time between the '70s and the '90s. So the intangibles of that time are significantly different to the intangibles we have today. So we do have to recognise that there is a big disconnect between what's in the standard and what we have today in the business world that we refer to as intangibles. So I think there's a lot of work to be done to uplift the standard to the modern era of business value.

Elinor Kasapidis:
And intangibles are the new frontier. That is where value is being created. That's where investment money is wanting to flow to. That is where the economic opportunities lie. Ram, as an accountant, we start with the balance sheet, we start with the financial statements, but increasingly we hear chief financial officers are becoming chief value officers. And listening to Nicolas, the amount of knowledge and judgement that they need to have in order to understand the analysis, the choices, the numbers that are being put before them, where do you see people need to be investing in their knowledge and what familiarity should accountants be developing with the valuation standards and the conversations in that space?

Ram Subramanian:
So the question of value is quite an important one. And if you think about value that is illustrated through financial statements, that goes to a certain extent. Now, don't get me wrong here, financial statements are the gold standard of reporting. So they're audited information, so there's got to be a degree of integrity in that information. So the evidence has to be there to support the information that is held or displayed in financial statements. So that's where the challenge really comes for intangibles, because quite often, you're not able to demonstrate very clearly what the financial future value is for the investment that you're putting into intangibles. So this is where management and those involved in decision-making around intangibles have to think a little bit outside the box.
They've got to demonstrate other ways in which value can be demonstrated. It's not a difficult thing to do. You just have to find the tools and the resources that allow you to do that. And one example would be the integrated reporting framework, which talks about value that goes beyond financial value, talks about intellectual capital, it talks about human capital. It talks about all those other things that could reflect value in different ways. So I think management and those who are making decisions around investments and intangibles need to think beyond what value is and not think about it purely in the financial sense, but beyond that as well.

Elinor Kasapidis:
And from the IVSC's perspective, you make the point, Nicolas, that we need to get tangible about intangibles. If you had to nominate one thing that you think CFOs, auditors and valuers could do differently over the next short time horizon to improve the quality and comparability of intangible asset valuations, what would it be?

Nicolas Konialidis:
We are seeing increasing convergence and interaction between those constituencies as Ram said, whether it's the CFO, the management, auditors, valuers, everyone is coming together and talking about value in general and we're seeing that specifically around intangible assets. And so if you ask me what we will see in the next 12 to 18 months, we are going to see more convergence, more interaction between all of those constituencies and we are going to see increasing transparency, I would say, around unit economics of the businesses. In the case, for instance, I'll just take one example. In the case of customer-related intangibles, we are increasingly seeing the use of cohort-based modelling. This is not widespread, but we're seeing this increasingly.
This is actually one set of techniques that are referenced in our perspective papers, but there are some constraints when it comes to financial reporting in the use of those techniques, or at least in some of these of the inputs that you would put in the use of those techniques. This issue of unit economics is very important because it allows the user of the valuation to understand how the valuer has reached this conclusion of value and the unit economics are really the underlying input when it comes to understanding that.

Elinor Kasapidis:
You did mention a lot around the techniques and looking at the different kinds of modelling and the coming together of different stakeholders. The International Organisation of Securities Commissions, better known as IOSCO, in November 2025, actually made a public statement on the need for high-quality valuation information in financial reporting, and that was strongly supported by the IVSC as well. You mentioned that it's going from perhaps that technical modelling, how management makes decisions to a higher order policy, regulatory, standard setting discussion. From your perspective, Nicolas, what is IOSCO signalling to the market here?

Nicolas Konialidis:
It is a call for better quality in valuations in the context of financial reporting because they have a set of policy objectives and they feel that, I don't want to put words in their mouth, but they feel that they would be better served by better quality valuations. And what that means in practical terms is that we are now seeing increased dialogue and coordination with the financial reporting community, the valuation community, the policy community, and the auditing community. And there have been several local initiatives, and in fact, IVSC has created a financial reporting working group that will listen to all this feedback from interested stakeholders.

Elinor Kasapidis:
And Ram, CPA Australia does a lot at the international standard setting level on behalf of the accounting profession. How do you see this confluence of stakeholders in this space and what are the contributions that accountants and CPA Australia can make to the discussion?

Ram Subramanian:
Well, one of the big contributions we're making this year is the intangible summit that we've just held. And in that summit, we heard a lot about some of the things that need to be considered. And earlier, we talked about the limitations of financial reporting, and Nicolas, you mentioned that too, but there is room for improvement. The IASB has already recognised this, of course, as I said earlier and other standard setting bodies and professional bodies such as CPA Australia is also contributing to this. Personally speaking, there's a reference point here. So the IASB has issued a standard on revenue, IFRS 15, which was issued a few years back. Now, many people agree that it's a very good standard, very well-built on sound fundamentals on how revenue is recognised. So there is integrity and control in the way someone arrives at the revenue number. It doesn't necessarily change the revenue number, but it provides very good vision into how the revenue number is calculated.
We want something similar for intangibles. So you may not come to a different conclusion. You may not come to a solution that looks different to what you have today, but what you have today is rules-based, old, and based on economics of a different era altogether. What you need is something that's modern, principles-based, something that's underpinned by good concepts and that can actually tell the market, "This is how my intangibles number has been calculated and presented." So we want that clarity and that visibility into how the intangibles number is being worked out. So I think there's work to be done, but the IASB has proved that before and I think they can do it again. One thing though, and this is an important point, technology doesn't wait and standards take time to develop. We would like for the IASB to produce something as quickly as possible and that is a real challenge.

Elinor Kasapidis:
That's very insightful because there is often a mismatch when technology or new innovations run ahead of the standards and the regulators are not quite sure how to respond, that's the space where investors and other stakeholders may find themselves, I guess, caught out or even management and board are making decisions that may not actually be in the best interests of shareholders or stakeholders or the public. I heard a lot about quality, integrity, control, transparency, and that with the new modelling techniques, it may not be that the number or the outcome or the value changes, but it's the trust and judgement that's built into what that number actually means and what it can be used for that's critical. Nicolas, if we don't get intangible valuations right, what are the real-world consequences you worry about most for investors, for auditors, for trust in financial reporting? What are some of the issues there?

Nicolas Konialidis:
Those are the second order effects of getting valuations wrong. And I can think of several consequences. First of all, you have to think of it as what we call valuation risk. And valuation risk, as we define it, is the possibility that the value is not appropriate for its intended use, i.e. that you're using a valuation that has been done for one purpose in another circumstance. And that means that there's a fundamental misunderstanding in what this value is. And what that means is then the decisions that are informed by that valuation. For instance, when that valuation is incorporated into financial statements, the risk is therefore that the capital allocation decision is wrong or is misguided. So that's one. And the second thing is the other set of consequences is a divergence in the practice of valuations. And that's why, as I said in opening this podcast, the IVSC always works towards promoting professionalism, because after all, a valuation is always the exercise of professional judgement by someone who is doing the valuation.

Elinor Kasapidis:
Thank you, Nicolas. It's really good to emphasise the professionalism piece. And Ram, from an accounting perspective, what do you think is really critical to getting intangible valuations right or what are the consequences if we get it wrong?

Ram Subramanian:
I'll probably just point to one thing and that's the question of relevance. And if you think about us as accountants as a profession, we are providing information on which the market makes decisions and that information's reliable, high-quality information. The market will not wait for us. It'll move on. If you look at value as we see it today and how the market sees value, there's already a disconnect between how markets place value on a business, the market cap, the share prices, and the actual value that's displayed in the balance sheet. So we are already in a race that we are a bit behind on, so I think we need to catch up a little bit and try and demonstrate to the market that this is where value lives. And I think it's quite important for us to ensure that it doesn't have to be in the financial reports. It could be elsewhere, but we'd still need to be able to demonstrate to the market, this is how value is being built and this is where value lives within businesses.

Elinor Kasapidis:
Thank you, Nicolas and Ram, for a really insightful conversation because intangible assets can actually feel quite abstract, but bringing it to the reality of what it means for financial reporting for investments and market confidence is critically important. It's been great, Nicolas, to get an insight about how the IVSC is working to bring greater consistency, transparency and professionalism to valuation practice globally. And Ram, thank you for grounding it in what it means for accountants day-to-day. 
If you'd like to dive deeper, we've included links in the show notes to IVSC's recent work on intangible assets as well as IOSCO's statement on high-quality valuation information. You can also watch the webinar version of our intangible summit available on our website and YouTube. That's it for this episode of With Interest. Please subscribe wherever you get your podcasts and share it with anyone dealing with valuation, audit or financial reporting challenges. Until next time, thanks for listening.