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Brand Values Under Threat?

Intellectual property specialists, A J Park & Son, are warning that New Zealand companies could have billions of dollars wiped off their balance sheets unless they make their views known to the Institute of Chartered Accountants on brand valuations before the end of the month.

Submissions are due in on an exposure draft on accounting for intangible assets (ED-87) which in its present form may not allow internally generated brands to be recorded on the balance sheet as intangible assets.

Mr Andrew Collins, managing partner at A J Park & Son said, "there are many examples of companies that sell their products or services at a price or volume advantage to their competitors, largely due to strength of their brand. To say that a strong brand does not have a place on the balance sheet as an intangible asset is hard to comprehend."

"For financial reporting to be of use to shareholders, the real value of the company needs to be shown. Clearly, intangible assets have significant value when you look at examples like Microsoft. They own few bricks and mortar, but their brand strength makes the company one of the most valuable in the world."

"If New Zealand wants to encourage businesses to successfully compete in the knowledge age, then we must have the tools to recognise their investment in intangible assets."

"While the accounting profession may be concerned that brands are hard to value, this should not be a problem that regular independent valuation can not overcome."

"The ED-87 accounting draft also assumes a brand has a life of only 20 years, which is incorrect. A brand, like a tangible asset, may depreciate over time if it is not looked after. Equally brands can appreciate in value if a company continues to invest in the brand and conduct its business well."

"As specialists in the intellectual property market, both in New Zealand and Internationally, we would not like to see the accounting profession in New Zealand put this issue in the 'too hard' basket. We urge all New Zealand businesses with an interest in brand value to make their views known to the Institute of Chartered Accountants before the end of the month."

ENDS

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