Marketing departments will become more accountable for the real value of their brands, following a decision by the accountancy profession to recognise the value of acquired brands on company balance sheets.
The profession has resisted attempts to allow intangible assets such as brands, licences and patents to be counted separately on balance sheets.
But now the Accounting Standards Board, which represents the whole industry, has published a discussion paper tacitly accepting the principle.
Previously all intangibles were included as “goodwill” during an acquisition. The new position would split “goodwill” three ways: intangible assets with a finite life, depreciated over a period of up to 20 years; the more nebulous goodwill; and intangibles with an infinite life that would have to be re-evaluated annually. Brands would be defined as intangibles – putting more pressure on marketing departments to perform.
Raymond Perrier, brand evaluation director at Interbrand, argues: “It gives a company the freedom to spend money and get a return on it. It keeps the notion of brands at the front of the mind and makes companies more accountable to shareholders.
“Marketing departments will have to take a long-term view of the brand and its value.”
The shift at the ASB covers acquired but not created brands, so the recently purchased Colman’s would be on Unilever’s balance sheet, but Persil would not. However, pressure will mount for all brands to be included.