MONDAY 16 MAY 2016 10:59 AM


Intangible assets are an often overlooked aspect of the annual report.

Due to potential lack of accuracy when reporting on intangible assets, some companies tend to shy away from it altogether, but this is a mistake since such a large percentage of a company’s value is its intangibles.

Intangibles, which include brand, people, know-how, relationships and other intellectual property, make up more of a company’s overall value than tangible assets, such as plant, machinery and property. The Brand Finance Global Intangible Finance Tracker (GIFT™) report (produced with CIMAand the IPA) is an annual study assessing the intangible assets of 57,000 companies.

According to the report, over half of equity analysts and CFOs feel that brand is an important consideration for risk management and lending decisions, and over 70% believe it to be an important factor influencing M&A activity.

Tony Manwaring, CIMA executive director of external affairs says, “Before any decision can be taken, leaders need an understanding of all factors material to their business. CIMA believes therefore that we need to account for the business and not just the balance sheet, fully recognising the value of intangibles such as reputation, brand and relationships. After all, you wouldn’t want to be in a plane where the pilot was ignoring half the instruments.”

A commitment to an annual evaluation of all company assets, including tangible assets, acquired intangibles and intangibles generated internally, could put boards, accountants, investors and analysts at an advantage.

David Haigh, CEO at Brand Finance says, “Lord Leverhulme, the founder of Unilever, once said that he knew half his advertising was working, he just didn't know which half. Since then, our ability to assess advertising effectiveness and intangible value has come on leaps and bounds, yet accounting standards and practices have not reflected this. If he were alive today he would probably observe that he knew half of what his business was worth but not the most important half - the brands.”


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