How Brand became a Legit Financial Asset
Brands are potent, valuable and rare. Successful brands drive consumer loyalty, creating long-term economic benefits and confirming with the definition of an asset. However, as late as the 1980s accountancy was unable to accommodate these assets.
Following the lead of Rupert Murdoch's News Corporation, the British Bakeries and foods company, Ranks Hovis McDougall, valued it brands $1 billion on its 1988 balance sheet. Next in line was the mighty Grand Metropolitan (now Diageo).
These brand valuations went largely unremarked till 1988 when Ranks Hovis McDougall (RHM), Britain's major Flour and baking company, decided to value all its brands, acquired and otherwise, and to place this valuation on its balance sheet. In 1989, the London Stock Exchange endorsed the concept of brand valuation as used by RHM by allowing inclusion of intangible assets in the class tests for shareholder approvals during takeovers. This proved to be the impetus for a wave of major branded-goods companies to recognize the value of brands as intangible assets on their balance sheets.
As of the year ended June 30, 2017, P&G carries $24 Billion of brand value on its balance sheet. The majority of this is for the Gillette brand, which it acquired in 2005, just after the new rules had come into effect.
Supplement with:
Branding: A Key Marketing Tool by John M. Murphy
Brands and Branding, Second Edition (Economist Books) by Rita Clifton
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