Theoretical Review: Signaling Theory Of Pragmatic Accounting

CHAPTER II

Theoretical Review

2.1 Theoretical Review 2.1.1 Signaling Theory Signaling theory comes from the theory of pragmatic accounting that focusing on the effect of information toward changes users’ behavior of information. This theory states that the company which has high performance is using financial information to send a signal to the market (Spence, 1973). Through that signal, the market is expected to differentiate between a good and bad of the company’s quality (Hartono, 2005). According to Wolk, et al. (2001), signal theory provides a solution to decrease asymmetry of information between the company’s management and the external parties. It solution is in the form of reliable financial information. So that, the manager

Based on this theory, the research about intangible assets, as unexplained value that effect the market value of the company and the effect of the component of intangible assets which is research and development of the company’s market value to be interesting to

International Accounting Standards (IAS) IFRS 38 defines “intangible asset is an identifiable non-monetary asset without physical". That’s definition adopted into the revised PSAK 19 (revised 2009).However, in PSAK 19 (revised 2009) states that there are some types of intangible assets in the form of physical forms such as compact disk which can contain computer software, legal document that contains license or a patent or a movie. In determining whether the asset has tangible and intangible it has treated according to PSAK 16 (Revised 2007). In paragraph 9 in PSAK 19 (revised 2009) explained that the entity often expand resources and create liabilities in the acquisition, development, maintenance or improving of intangible resources, such as science and technology, design and implementation of systems or process, licenses and intellectual property rights, market knowledge and trademarks. However, not all elements listed in paragraph 9 meet the definition of intangible assets, namely the identification, control over resources and their economic benefit in the