Brand valuation: a recent history
The practice of placing brand value on company balance sheets came into vogue in the late 1980s, although there has been much debate over it since then, particularly the lack of consistency in approaches. The past 20 years have seen several significant developments to address this and to push brand valuation into mainstream practice.
The International Accounting Standards Board (IASB) reissues IAS 36 Impairment of Assets (which “seeks to ensure that an entity’s assets are not carried at more than their recoverable amount”) and revises IAS 38 Intangible Assets (which defines and sets out the criteria for measuring intangible assets). The IAS also releases International Financial Reporting Standards Foundation (IFRS), which states that intangible items acquired in a business combination must be recognised as assets separately from goodwill if they meet the definition of an ‘asset’, are either separable or arise from contractual or other legal rights. Additionally, the amortisation of goodwill and intangible assets with indefinite useful lives is prohibited, the requirement being that they are tested for impairment annually. In 2019, David Haigh, CEO of Brand Finance, reflected: “These standards – while stopping short of allowing internally generated intangibles being put on the balance sheet – formally endorsed the idea that intangible assets have value and can be valued accurately.”
Austrian Standards publishes ONR 16800, the first ever standard to focus on brand evaluation. The standard specifies the requirements for the valuation of brands and marks taking into consideration valuation purposes, bases, approaches and methods, the sourcing of data and assumptions required for valuation.
The International Organisation for Standardisation (ISO) publishes ISO 10668:2010 Brand valuation – Requirements for monetary brand valuation, which specifies a framework for brand valuation, including objectives, bases of valuation, approaches to valuation, methods of valuation and sourcing of quality data and assumptions. It also specifies methods for reporting the results of such valuation.
The ISO publishes ISO 20671 Brand evaluation – Principles and fundamentals, which aims to standardise the technical requirements and evaluation methods involved in brand valuation. It complements ISO 10668, Brand valuation – Requirements for monetary brand valuation, which focuses primarily on the financial aspects. Dr Gerhard Hrebicek, chair of the committee that developed ONR 16800 and played a role in the development of ISO 20671, explained: “ISO 20671 is aimed at businesses of all kinds wishing to increase their brand value and provides a starting point for high-level planning and governance, including best practices for brand management and brand reporting. It provides a more holistic view, covering non-financial as well as financial measures, and forms the basis for other, more specific standards to be developed.”
INTA releases its Brand Value Special Task Force Report, suggesting the critical role that trademark practitioners should play alongside financial and marketing professionals in brand valuation and evaluation exercises. The report includes 20 findings and recommendations for in-house practitioners, outside counsel and INTA. “Today’s times make it increasingly more important for companies to understand and come to a consensus on how to calculate brand value,” said INTA CEO Etienne Sanz de Acedo. “So many forces are at work that can influence brand value for better or worse, and brands need to continually stay on top of this and adapt accordingly.”