Evan Davis on... the money in brands

Watch

Listen

Read

Everyone recognises that brands are valuable but can you put a precise monetary value on a brand, and what would you do with that precise monetary value once you had it? Well, a lot of companies like to get precise monetary values on the brand, value it and then put it in the accounts. And that seems perfectly logical - after all, the brand is valuable, the other stuff the company owns like the headquarters, the machines, the robots, the shop buildings, whatever it is, it’s all valuable - so it should all be scooped together and put on the balance sheet.

But it means that you’re mixing up apples and oranges, doesn’t it? It means that you’re taking some hard stuff, like the buildings or the desks or the computers that can be valued fairly objectively, and you’re chucking into the same mix brand values that necessarily and inevitably involve some rather subjective judgement.

Some argue that you shouldn’t mix all those things into the company accounts, you should put the hard stuff in the company accounts and then you should let the city investors, the analysts or whoever judge what they think the company can earn, given those hard pieces of data in the accounts. They should value the brand, the accountants should stick to the really objective stuff. It comes right back to who the accounts are written for.