Reporting intangibles – an introduction
In many respects, trademark professionals deal in the intangible. You may receive a physical certificate when you register a mark but the asset on which brands are built is a classic intangible, which the IFRS defines as “an identifiable non-monetary asset without physical substance”. Other examples of intangibles include computer software, patents, copyright and import quotas. And while these stand apart from tangible assets (eg, land, equipment and inventory) they have substantial worth, especially given the ease with which they can be sold, transferred of licensed.
That value is on the rise – and not even a global pandemic could halt its momentum. In Global intangible value rockets - inside the numbers, Brand Finance’s Annie Brown analyses data from the latest Global Intangible Finance Tracker report to reveal that global intangible assets are currently worth an estimated $74 trillion. If the historical rate of change holds steady, she calculates, they could reach $1 quadrillion by 2050. In short, intangibles are driving economic growth and helping companies to prosper even in difficult global environments.
However – and it is a big however – not all of this can be read on company balance sheets. Accounting rules, which state that internally generated intangible assets cannot be disclosed, stand in the way of transparency. In intangible assets: a manifesto, Brown calls for change, warning that financial reporting standards will always be flawed while this contradiction exists between the need to recognise the value of acquired intangibles and the absence of any requirement to disclose information about internally generated versions.
This tension means that the reporting of brand value and revenues remains a live topic. Last year the verdict in a dispute between Coca Cola and the US Inland Revenue Service sent shockwaves around the world. In Lessons in brand ownership and tax reporting, Jonathan G Polak, Todd C Lady and Joseph Balthazor Jr of Taft Stettinius & Hollister analyse the case and its strong message on the allocation of branding profits among international subsidiaries.
Meanwhile, one of the key benefits of identifying and reporting value is the ability to financially leverage rights. Yet, to date, IP-focused lending and insurance has remained far from the mainstream. In July 2021 Inngot completed a £1 million funding round to support the building of a platform of scalable, data-driven methods designed to assess the suitability of intellectual property as loan collateral. In Facilitating IP-focused lending and insurance: how one company is strategising market transformation, we interview the company’s CEO to uncover how the firm intends to shift mindsets on IP value and empower others to capitalise on their intellectual assets.