Chapter 9: The Challenge of Measuring Intangibles: Insights from Brand Valuation

Both American and International Accounting Standards lead to the invisibility of most brand values in financial statements, as these standards recognize only those brands acquired externally either through a purchase or a merger. Nonetheless, over the last several decades, it has become increasingly evident that company value is primarily driven by intangible assets such as brands and other intellectual property. As such, in a knowledge-based economy, it is increasingly important for companies to develop these assets. Empirical evidence produced by prior research also demonstrates that brand values are market value relevant, that is, knowledge about their existence and value is important to investors. Consequently, and in tangent with the increased use of fair value measurements based on projected future cash flows, we argue in this chapter that it might be time to end the invisibility of brands.