In the past, we as Accountants have seen many large acquisitions that yield extremely large goodwill values that needed to be accounted for whether by amortization or direct write off into the income statement.

This is mainly due to ignorance of many companies previously ignoring the power of brand valuation hence this so-called intangible asset was not properly valued and placed in the balance sheet.

In reality, branding is by no means a new concept. The  process of valuing a brand and placing this value on the balance sheet is the same as we would for tangible assets.

Coming back to the most interesting part, it was said that Ranks Hovis McDougall is the first company to ascribe a value to its portfolio of brands and include this figure on its balance sheet. It capitalised its brands in defence of a takeover bid by Goodman Fielder Wattie.

Incidentally, the aftermath of this first brand valuation and with the introduction and then the development of both International and UK based accounting standards, guidelines have been set as to the manner in which brand valuations should be conducted.

As all accountants are aware, despite the aforesaid evolution after the first brand valuation and until now, brand valuation remains a somewhat contentious issue especially within the accountancy profession.

One aspect that is still very challenging is that based on the current accounting legislation surrounding brand valuation, internally generated brands can not be capitalized as this would involve the resurrection of costs that have already been written off to the profit and loss account, which might be construed as  creative accounting.

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