The purpose of this paper is to suggest an empirically based model for identification,
recognition and measurement of internally generated intangible assets (IIAs) that meets the
fundamental qualitative characteristics of useful financial information. The paper sets out to
empirically test observed relations reflecting new product development activities and their
economic consequences in listed companies, by means of personal interviews with senior
managers, selected on the basis of their knowledge in the specificities of the innovation
process in their firm by means of a phenomenographic analysis the identified relations are
conceptualized in terms of logically related categories. There seems to be a match between
the identified observed relations and the recognition requirements that International
Accounting Standard (IAS) 38.57 sets out, which indicates that the requirements are relevant
and information meeting the requirements may faithfully represent what it purports to
represent or reasonably can be expected to represent. By relating the recognition and
measurement of IIAs to the proposed model the linkage between IIAs and related
organizational mechanisms will be made more explicit which may improve the
representational faithfulness of the financial information. One of the practical implications of
this study is that an entity specific control system based on the recognition criteria presented
in paragraph IAS 38.57 can improve the robustness of recognized IIAs arising from
innovative activities. By building a bridge between the dynamic capability literature and the
accounting literature the paper develops a new model of how to account for IIAs.