The regulator has called for an overhaul of accounting rules for mergers and acquisitions, which are proving a stumbling block for investors. According to the Financial Reporting Council, companies are struggling to come to terms with the reporting requirements. The FRC expects M&A activity to increase as the economy picks up, but criticised IFRS 3 Business Combinations introduced in 2004, which have left many companies still trying to understand the details of the requirements. A study of 20 acquisitions that took place in 2008, found that the standard had been poorly applied by companies due to unfamiliarity with its requirements and the complexity of valuing intangible assets such as brands and customer relationships. Director of corporate reporting at the FRC Ian Wright, said 'a step change' was needed in the quality of M&A transactions reporting in annual reports. 'Improvements should result, in part, from new fair value guidance and more practical experience of estimating fair values for intangible assets,' he said. Going forwards, Wright said that recent changes to IFRS 3 means that more intangibles will be recognised for accounting purposes, which could lead to a better consistency between disclosures on acquisitions in the accounts and the reasons for acquisitions set out in business reviews.