UK Brand Asset Recognition Beyond “Transactions or Events”

long range planning

Long Range Planning 34 (2001) 463-487

www.lrpjournal.com

UK Brand Asset Recognition Beyond “Transactions or Events” Tony Tollington

Companies’ financial statements no longer reflect the true value of the corporation. This is because of a widening gap between accounting book values and market values due to intangible assets such as brands not being disclosed. This paper argues that the definitional requirement for “transactions or events” appears to restrict their recognition, and therefore disclosure on balance sheets. It therefore proposes a rethink of the situation with the impetus coming from within the accounting profession. 쎻 c 2001 Elsevier Science Ltd. All rights reserved.

Introduction A gap between disclosed accounting book values and market values exists partly because of undisclosed market values. Although published financial statements have never purported to bridge this gap, it now appears to be widening. For example, Knowles1 states with reference to the Brand Finance Report 19992 that “at the end of 1999, the net asset value of the FTSE-350 represented only 28 per cent of the aggregate market capitalisation. A decade earlier the figure was just below 60 per cent. Although brands are only one type of intangible asset … other surveys have estimated that brands account for approximately 40 per cent of the total value of intangibles.” This casts doubts upon the “representational faithfulness” and, hence, usefulness of published financial statements where substantial intangible asset values remain undisclosed. The decision, for example, of one FTSE-350 company, Kingfisher, not to recognise and capitalise brands such as “Woolworths” as assets on its 1999 balance sheet is an issue in which managers, as financial information users, have a stake. First, brands that are not recognisable as assets can end up being 0024-6301/01/$ - see front matter 쎻 c 2001 Elsevier Science Ltd. All rights reserved. PII: S 0 0 2 4 - 6 3 0 1 ( 0 1 ) 0 0 0 6 9 - 3

Tony Tollington is a senior lecturer at the Middlesex University Business School, The Burroughs, London NW4 4BT, UK. He is a management accountant interested in the recognition, measurement and management of intellectual capital. E-mail: [email protected].

Recognition logically comes before measurement

treated as expenses instead and as every manager knows expenses should be cut as much as possible. Second, managers should not be left ignorant of the financial impact that intangible assets can have on a business. For example, according to Reckitt Benckiser’s 1999 balance sheet, its capitalised brand assets constitute 72 per cent of total net assets, a substantial figure by any reckoning. Third, there is an obvious inconsistency in the brand asset recognition and capitalisation practices, as illustrated by the two examples above—one company capitalises brand assets while the other does not. The recognition of intangible assets in general is addressed in management literature.3 Similar recognition is given in marketing literature particularly with regard to intangible brand assets.4 Consequently, there is nothing new in the opening reference to a financial information gap in respect of intangibles. It is an issue upon which the UK Chartered Institute of Marketing,5 for example, expresses the following view: It is not the acceptance of brand equity which has been at the heart of the debate; it is whether accounting practices can adapt to a changing business environment in which “worth” is typified by a set of intangible assets. This is an issue which our accounting colleagues show a persistent lack of commitment to resolve. And resolved it should be. Rather than adopting the perspective on “why intangible assets should be disclosed”, this paper adopts the opposite perspective, asking “why intangible assets are not being disclosed” by the accounting profession. Of necessity it must delve into accounting matters in some depth. To quote from one anonymous referee: many who push for a higher recognition of intangible assets do so outside the scope of traditional accounting. In this sense … the author(s) are “battling from within”. In the context of this paper therefore, “recognition” refers to the accounting recognition of an asset requiring its capitalisation and disclosure as an asset on the balance sheet of UK companies. Recognition should ideally be according to some definition of an asset, not necessarily the existing UK accounting definition. It is distinguished from measurement, first, because recognition logically comes before measurement and, second, because recognition should be directed toward the nature and/or resource of an asset, a feature of Solomons’6 definition of an asset. It is axiomatic that the recognition of the nature and/or resource that constitutes an intangible asset is highly problematic. This paper proposes that the recognition of an intangible asset should be according to a legally separable identity. Further, that the existing accounting requirement for asset recognition to be initially based upon recognisable “transactions or events”,7 such as a purchase, may now be restrictive. It is a point that is supported in general terms by Oldroyd and, specifically, by the content of this paper. While the paper is primarily directed towards the issue of asset recognition, the subject of measurement cannot be ignored: the

464

Brand Asset Recognition

accounting profession uses measurement as the means of asset recognition. “Measurement” is a substantial subject in its own right and one which the accounting profession has difficulty in determining. References to measurement in this paper will therefore be directed in general terms at this “difficulty” rather than in attempting to resolve the issue of a suitable measurement basis. Given the stated predisposition, the paper is not invalidated: it is in the nature of a critical piece of research focused upon the accounting criteria for recognition of an asset and intangible brand assets, in particular.

The existing asset recognition criteria According to the UK Accounting Standards Board, assets are defined as rights or other access to future economic benefits controlled by an entity as a result of past transactions or events.8 The key features of this definition, that is, future economic benefits, controlled, and past transactions or events are also the key features of the US definition of an asset.9 A feature of this definition is that the term “future economic benefits” is restricted by a narrower legal/accounting term that recognition should be the result of “past transactions or events”. So, for example, an inventor and holder of a product patent may choose to manufacture and sell that product. He or she brings to the business a patent source of future economic benefits in terms of intellectual capital and varying degrees of monopolistic protection. However, the patent does not necessarily arise from transactions or events and, therefore, until it is sold to a third party it is not recognisable by the accounting profession as an asset. Similarly, the accounting definitional requirement for transactions or events appears to restrict the widespread recognition and capitalisation of brands as assets on UK balance sheets, in particular the capitalisation of internally-created brand assets. This assertion is supported here by critical analysis, deductive reasoning and published financial statements. While this argument uses the recognition of brand assets to illustrate the point it can be extended to many currently unrecognised intangible assets. The most common form of “transaction” is that associated with the purchase of goods and services, whereas, “events”-based recognition typically refers to one-off items such as judgement on debtors arising from litigation. Recently the accounting profession has clarified and broadened the definition of events to include discovery, extraction, processing or innovation.10 Whether innovation events can now embrace internally-created business assets such as brands, software, patents, information databases and so on remains to be seen. However, the clarification of the term “events” is preceded by an apparently contradictory statement that the term “transactions” or “events” is not used in any precise way.11 It suggests that a degree of vagueness in the interpretation of this root definition is acceptable as a means of ensuring flexibility in practice. The balance sheet tends to exclude future economic benefits

Long Range Planning, vol 34

2001

465

that arise from many internally-created or “home-grown” intangible assets. Indeed, where they have previously been capitalised, the introduction of Financial Reporting Standard No.10 on Goodwill and Intangible Assets12 has seen a reversal in such limited disclosures in 1998/99. For example, a reversal in the capitalisation and disclosure of United News and Media’s publishing titles, a restatement of Ladbroke’s valued licences back to their transaction-based original cost and the removal of Mirror Group’s internally generated titles/mastheads, not the purchased ones, from the balance sheet. Intangible assets are the result of intellectual and/or artistic creativity. The future economic benefit from them is often only indirectly related to transactions or events, for example, through the substitution and capitalisation of labour transaction costs associated with the internal creation of a software asset.13 According to Professor Quah14 successful economies are becoming more “weightless”. In a weightless economy, success comes not from having built the largest factory or the biggest oil supertanker but from knowing how to locate and juxtapose critical pieces of information, how to organise understanding into forms that others will demand. One only has to look at Nintendo computer software or the McDonald’s brand to realise that such organised understanding represents a potentially huge source of future economic benefits. However, because these benefits are internally created by a business they are often not recognisable as having arisen from identifiable transactions or events. Indeed, Bill Gates, Microsoft’s CEO, recently said: “Our primary assets, which are our software and our software-development skills, do not show up on the balance sheet at all.”15 If indeed the requirement for transactions or events appears to be preventing the accounting recognition of such assets let us now consider some of the features of this term in more detail. This assessment is structured as follows and relates primarily to the recognition of brand assets: 앫

Some intangible assets do not have a transaction-based existence, date or amount at all;

앫

Transaction-based measurement dominates in the accounting recognition of assets;

앫

Brand assets are of a separable nature—irrespective of transactions of events—and hence can be recognised accordingly.

Some intangible assets are not transactionsbased It does not cost anything to create a milk or fisheries quota— recognition is established by Government edict. The transaction is only created when the products are sold on to a third party. Consider websites such as “Yahoo”. The real asset is not the 466

Brand Asset Recognition

website: it is the access to customers who come to that website, that is, the customer lists. They are attracted to the intellectual and artistic creativity that they find there—Quah’s “organised understanding”—which is independent of any transactions or events. Yet, the market capitalisation that some website companies command is suggestive of substantial future economic benefits. According to FRS10 an internally-created intangible asset may now be capitalised if it has a readily ascertainable market value (ramv). Specifically, that the asset belongs to a homogeneous population of assets that are equivalent in all material respects and that for this population there is an active market, as evidenced by frequent transactions. Whilst the ramv may be evidenced by frequent transactions, which act as a type of benchmark, there is now no requirement for individual assets recognised by this method to possess their own transaction for capitalisation purposes. According to Kennedy16 it is quite difficult to find examples of ramv-recognisable intangible assets but EU milk quotas and airport landing slots appear to fit the category. However, conversely, the ASB was reported as rejecting calls for the capitalisation of websites as assets.17 There is therefore little consistency in the accounting recognition of these assets. For example, contrast the newly-created ramv basis for the recognition of intangibles with the slightly earlier Statement of Principles document where the definition of an asset “… requires that access to future economic benefits must result from past transactions or events”.18 The element of compulsion that the recognition of assets must result from past transactions or events is obviated in respect of certain types of internallycreated assets where now only the ramv is required. This development, along with the broadening of what is meant by the term “events”, represents the first real evidence that the accounting profession may be considering an extension to, or relaxation of, the existing asset recognition boundary created by transactions or events. With regard to the recognition of internally-created brand assets, much will depend on whether companies can justify to their auditors the existence of a readily ascertainable market value. The evidence from examples earlier in this paper suggest that companies may have difficulty in establishing a ramv and, therefore, are now removing such disclosures from the balance sheet. For those companies that already account for brand assets, such as United Biscuits (see Table 1), taking a principled minority stance towards the separable recognition and disclosure of brand assets is fine providing others follow your lead. Otherwise, a company risks turning principled and enlightened practice into perceived maverick behaviour. In the absence of an increasing national trend towards separable brand asset recognition the temptation for accountants is always to return to the majority stance, particularly where the majority stance is validated by the introduction of a reporting standard such as FRS10. Egginton,19 for example, argues that the biggest hurdle for recognition of

Long Range Planning, vol 34

2001

There is little consistency in the accounting recognition of these assets

467

Table 1. UK companies adopting brand asset recognition on their balance sheets, in all cases as extracted from purchased goodwilli Brand Asset Companies 1991 Cadbury Schweppes Grand Metropolitan* Guinness* Ladbroke London International Group Reckitt & Colman United Biscuits WPP SmithKline Beecham Dalgety Diageo (*merger) Inchcape Totals Number of Companies

1992

1993

1994

1995

1996

1997

1998

1999

308 2464 1395 377 32

385 2492 1395 377 39

446 2924 1395 377 40

522 2782 1395 277 40

1689 3840 1395 277 36

1547 3884 1395 277 32

1575 – – 277 32

1561 – – 277 32

1656 – – 277 –

587 147 350

673 157 350

682 217 350

1296 248 350 776

1273 251 350 751 130

1145 211 350 688 130

5660 8

5868 8

6431 8

7686 9

9992 10

9659 10

1135 138 350 652 130 4995 22 9306 10

1187 – 350 644 – 4727 19 8797 8

1489 – 350 640 – 4875 – 9287 6

i

Source: Published annual report and accounts of the top 174–227 UK Plcs, by turnover (listing per the Times 1000 Companies for 1993, back-dated for two years). The reduction in the size of the data set was due to takeovers and mergers over the eight-year period. These are not necessarily the only companies to disclose brand assets on UK published balance sheets.

intangibles may be an innate preference for tangible assets in accounting conventions, rather than questions of expected future benefits or whether magnitudes are sufficiently reliable for recognition. United Biscuits’ 1998 accounts show a reversal of brand accounting policies away from the separable recognition of brand assets towards their inclusion in goodwill. One of the reasons for this reversal, cited in United Biscuits’ annual report, is the FRS10 requirement for “sufficient reliability” with regard to measurement of brand assets. However, this requirement pre-dates FRS10 and is a problem endemic to all brand assets, past and present. Though speculative, it seems that the desire of United Biscuits to return to mainstream goodwill/brand accounting practice is stronger than its support, conceptually, for the notion of the separable recognition of brand assets on the balance sheet. The brand accounting policies of United Biscuits for 1998 is as follows: 앫

468

Accounting Policies: Intangible assets—Prior year adjustment. FRS10 also introduced new requirements for the recognition and measurement of intangible assets and the revenues generated by such assets in subsequent years. The Directors consider it unlikely that intangibles will be able to be distinguished from goodwill reliably enough to meet the strict requirements of FRS10. Accordingly, the value of any brands acquired in the future is likely to be subsumed within goodwill. To ensure consistency of treatment with previously

Brand Asset Recognition

acquired goodwill, all brands acquired prior to 1998 have been reclassified as goodwill and written-off to reserves as a prior year adjustment. The accounting requirement for sufficient reliability in the measurement of intangible assets is a key reason for their absence from UK balance sheets. The next section of this paper suggests that it is dominant in the recognition process to the exclusion of many brand assets from the balance sheet. As explained in the introduction, it is not the intention of this paper to digress into the reliability of measuring brand valuations or accounting measurement techniques. Yet, if measurement is the means by which accountants recognise intangibles it is incumbent upon the author to explain why “measurement substituting for recognition” is flawed and why “legally separable recognition prior to measurement” is logically superior. In this regard, the paper seeks to show that the issue of reliability of measurement strikes to the heart of accounting itself and is problematic in relation to all assets, not just in respect of intangible assets. It follows that to use the lack of reliability of measurement argument in respect of intangibles alone is, in part, a flawed argument because it is applicable to all assets as their value changes beyond that date and amount initially established by transactions or events— hence the title of this paper.

The dominance of transaction-based measurement A transaction for the purchase of a brand asset establishes a recognisable entity, date and amount, for example, BMW’s £40 million purchase of the Rolls-Royce brand name in 1998. In contrast, while an internally-created brand asset is a recognisable entity, often legally recognisable through a trademark, the date and amount of creating an internally-created brand asset may be indistinguishable within the total transaction costs. So, with regard to the Rolls-Royce example, it remained internally-created and unrecognisable as an asset until it was subject to a transaction and, at that point, its existence, date and amount (£m) became recognisable. Already, there was sufficient legal evidence for its existence and there was some evidence of its ability to produce future economic benefits, otherwise BMW would not have purchased it alone. However, until it was purchased, its initial recognition as an asset was based upon largely unidentifiable or missing transactions or events which, consequently, could not be measured accurately. Figure 1 shows a process chart for the UK accounting definition of an asset. The left-hand branch of Figure 1 refers to reliability of transactions-based measurement for an asset while the right-hand branch addresses the recognition of other relevant assets, inclusive of internally-created assets, arising outside the scope of transactions or events. The transaction-based recognition of the Rolls-Royce brand

Long Range Planning, vol 34

2001

469

Figure 1. Process chart for the recognition of assets (source: author)

would have followed the left-hand branch of Figure 1. However, such recognition is restrictive in the sense that the Rolls-Royce brand existed before it was purchased and, therefore, was “relevant”, in terms of its ability to contribute to future economic benefits, before as well as after its purchase by BMW—the righthand branch of Figure 1. A transaction simultaneously creates a recognisable entity and a measured amount but it also appears to preclude brand asset recognition arising outside this context, for example, recognition of an asset based on its nature and ability to produce future economic benefits, irrespective of transactions or events. Of course, this would not simultaneously establish the measured amount, but that would not preclude an independent brand valuation subsequently taking place. In respect of RollsRoyce, the transaction-based amount was viewed by some commentators as “on the cheap”.20 It is a moot point as to whether the transaction-based amount of £40m or an independent valuation would represent a more accurate view of its worth. The point here is that the asset recognition boundary raised by transactions or events appears to be both a robust and restrictive one. Certainly, all those brand accounting companies presented in 470

Brand Asset Recognition

Table 1 only recognise brand assets arising from a transaction for the purchase of a business. More specifically, as an extraction from the goodwill purchased as part of a transaction for the acquisition of a business (see Appendix A). It matters little whether internally-created intangible assets are capable of producing future economic benefits. If the related transactions or events cannot be measured accurately then the asset tends not to be recognised within the accounts. For example, on the 1999 balance sheet of Glaxo Wellcome neither the valuable research patents nor the scientists who created them are represented as assets, despite being a critical source and determinant of wealth. The salary payment to these scientists (an expense) probably bears little relationship to the future economic benefits to be derived from the patented ideas created by them. These are the true internally-created sources of wealth not recognised within a transactions or events-based boundary. Also, determining which labour transactions contribute to future economic benefits is problematic. The same is also true in respect of Glaxo’s drug brands: they too are not capitalised and disclosed on the balance sheet. The dominance of transactions or events-based measurements in the recognition of assets is deeply rooted in current accounting practice (the left-hand branch of Figure 1). To understand it one needs to consider the difficulties of the measurement process itself and then in relation to the ontological security derived by accountants from their reliance upon recognisable and verifiable transactions or events. The measurement process is underpinned by the accounting postulate that the unit-of-measure is money. It is assumed to be a relatively stable unit21 and it is the metric that is used as a representative proxy of economic reality for a business entity. Let us consider this statement. First, from an accounting viewpoint monetary stability depends upon whether, for example, it is representative of general purchasing power or simply, units of money. The measured amount established by a transaction or event, say a purchase, is usually representative of units of money and also, units of purchasing power at the date of purchase. Beyond that date the original transaction cost becomes historic cost and very often becomes unrepresentative of general purchasing power due, for example, to the effects of inflation/deflation and holding gains/losses. However, the accounting profession is very clear that accounting measurements are not representative of purchasing power. Koeppen,22 in referring to the US Financial Accounting Standards Board (FASB) recognition criteria,23 states that the monetary unit or measurement scale … is nominal dollars. And unless inflation escalates dramatically, nominal dollars will continue to be used for accounting measures. Similarly, implicit to the ASB’s determination of what mix of historic cost and current value should be used is the acceptance of nominal sterling measurements. Ad hoc remeasurements attempt to update historic cost values to current values in order to bridge some of the gap between units of money and their equivalent units of

Long Range Planning, vol 34

2001

The inputs and outputs of accounting are not ‘just numbers’

471

purchasing power. However, the gap is never bridged completely and previous comparable attempts to bridge it, for example, SSAP16 on Current Cost Accounting24 were unsuccessful and subsequently withdrawn. In contrast, Chambers25 maintains that the inputs and outputs of accounting are not “just numbers” nor “just numbers of money units”, required to satisfy no other rules than the calculus of numbers. Dated amounts of general purchasing power are what commerce and finance are about. It is against this problematic background that brand valuers advance their case for the inclusion of brand valuations on the balance sheet, mostly independently of transactions or events and the measurement established thereby. Brand valuers typically use discounting techniques and assessments of future brand-related financial returns, which establish a value that attempts to fill some of the financial information gap referred to in the introduction. At the same time they would undoubtedly argue that it produces a “better picture” of economic reality than that portrayed by the accounting profession using their approach to the measurement process. Whether disclosed brand values, such as those presented in Table 1, are truly representative of general purchasing power or some other measured view of economic reality is uncertain. It is a problem that is endemic to all brand valuation technologies. To the brand valuer it probably does not matter as long as he/she can argue that a “better picture” of economic reality is created by the inclusion of brand assets on the balance sheet, for example, by using commercial realism and the current mishmash of accounting measurement bases as a justification for one more measurement method. In contrast, to the accountant, the desire to link the recognition and disclosure of brand assets to transactions or events is sufficiently strong that brand values are nearly always extracted from the purchased goodwill arising from the transaction for the acquisition of a business. It can reasonably be argued that the linkage of brand values to purchased goodwill is probably due more to the latter’s transaction-based existence and amount (Appendix A) rather than to any conceptual linkage, particularly if it can be shown that purchased goodwill is not an asset at all (Appendix B). Secondly, Kaplan and Norton’s26 balanced scorecard shows that a version of business reality can be presented in non-monetary measures as well as monetary ones. See, also, Davidson49 for ten marketing metrics that he regards as most likely to be valuable in corporate reporting. Hooper and Low27 have considered the use of narratives and pictures to portray business reality. So, money is not the only way to present business reality and therefore it is debatable whether monetary units can capture a sufficiently reliable picture of economic reality. It is against this mixed background that brand valuers are able to advance and support their case for the integration of marketing and financial metrics in the creation of brand values. However, as the following brief assessment of brand valuation methods shows50, there are varying degrees of subjectivity associated with every method. Brand valuations comprise the following methods: price pre472

Brand Asset Recognition

mium, earnings valuation, royalty payment, market value and historic cost methods, which are examined below: 앫

앫

앫

앫

The Price Premium method is where the income of an unbranded competing product is deducted from the income of a comparable branded product to establish the excess or premium revenue of the brand. Assumptions are then made with respect to market growth, market shares, inflation etc. so as to establish cashflows for discounting purposes. A number of difficulties arise with this method apart from the obvious problems of subjectivity in cashflow construction and selecting an appropriate discount rate. For example, there may be no unbranded product comparable to the branded product being valued and the method’s concentration on price ignores costs and other factors such as manufacturing economies of scale from a high-volume brand. None of the brand-disclosing companies in Table 1 used this method. The Earnings Valuation method is where a prudent price/earnings multiplier or similar multiplier is applied to a brand’s profits (that is, after eliminating the profits from unbranded goods which are often produced in parallel to the brand and the profits from assets that do not contribute to the brand’s strength). In using a p/e multiplier there is an underlying and, perhaps, unjustified assumption that the brand profits can be valued in the same way as the business as a whole. Other multipliers often rely on an assessment of the brand’s strength, that is, longevity, leadership, legal protection etc using a point-scoring system with all the attendant subjectivity associated with such approaches. Of course, multipliers are of limited usefulness if there is difficulty in isolating the brand’s profits in the first place. Also, it is possible that the year(s) from which a brand’s related profits are selected may not provide a representative baseline upon which to base a multiplier. Examples of Table 1 companies using this method include Dalgety and United Biscuits. The Royalty Payments method involves the determination of royalty income from the licensing out of a brand/trademark, such as the Cadbury brand name to Premier Brands. This provides an amount on which either a discounted cashflow or multiplier can be applied. Leaving aside the secondary question of the appropriateness of the selected multiplier or discount rate, the principal unanswered question is whether royalties are an effective surrogate for brand premiums? An example of a company using this method is WPP which bases its brand valuation on “… the present value of notional royalty savings …”. The Market Value method is very difficult to determine because the market for brands is, at best, thin and volatile. Where the brand is being sold, willingly or otherwise, the realisable value is dependent on the circumstances of the sale, for example, whether companies are in a competitive bidding situation, such as when Suchards and Nestle´ competed for

Long Range Planning, vol 34

2001

The market for brands is, at best, thin and volatile

473

앫

control of the Rowntree confectionery brands in 1988. Where the brand is being acquired, it is usually valued by reference to the entry price or replacement costs involved in creating similar brand loyalty, brand awareness, and so on. Costs derived under this method are highly subjective. For example, there is no doubt that a replacement Virgin brand would be expensive, but until it is actually undertaken there is no way of calculating the required sum of money. Examples of Table 1 companies using this method include SmithklineBeecham and Reckitt & Colman. The Original/Historic Cost method involves the aggregation of purchase and/or marketing and R&D expenditure linked to a brand. An obvious dilemma is the isolation of costs specific to the brand alone. This may require the capitalisation of costs incurred and expensed decades ago. From an accounting viewpoint this would be inconsistent practice because historic cost-based balance sheets require that asset values should represent the aggregation of costs not yet charged to the profit and loss account rather than those that have already been expensed. It is also inconsistent because there are brands such as Rolls-Royce where the cost of marketing is small and yet the brand value is substantial. Nevertheless, UK companies that use historic cost for brand accounting purposes include Cadbury Schweppes.

Finally, on the issue of measurement, using money as a representative proxy of economic reality assumes that the reality can be readily identified and quantified.28 However, it is a prominent characteristic of today’s economic reality that the wealth-creating potential of many businesses is tied up in difficult-to-measure intangible assets that are consequently not disclosed at all. The inevitable consequence of such measurement-related problems is that there are bound to be inconsistencies in the recognition and disclosure of financial information, the small number of UK company-specific brand asset disclosures being an obvious example (Table 1). Indeed, the neglect of the laws that govern operations on money amounts lies at the heart of all the disputed features of accounting and much of the argument about alternative systems or styles of accounting.51 So it remains today because the above unit-of-measure postulate is found from what is already accepted as logical, rather than being derived from any common accounting theory or law. There is no doubt that any common accounting theory or law would throw up practical inconsistencies, such as those presented here in respect of transactions or events-based measurement. The point is that once inconsistencies are exposed they might lead to some revision in that accounting theory/law and, then, in practice. In respect of the disclosure of assets and intangibles in particular, one is currently left with an individual judgement call, supported or not by audit opinion, as to whether there is “sufficient evidence” and “sufficient reliability” for the recognition and measurement of assets. With regard to sufficient reliability 474

Brand Asset Recognition

in brand valuation technologies, such as those offered by Interbrand or Brand Finance, Power29 states that the line between what is and is not a reliable calculative technology cannot be drawn sharply. One important reason for this is that the concept of “reliability” is relative to the calculative technologies which we happen to accept. Hence, reliability is a matter of what is socially accepted as reliable and this can vary enormously across cultures. In this regard, it is doubtful whether anyone would state that there is insufficient evidence for a brand’s existence particularly where this is legally backed by a trademark. However, it is the issue of sufficient reliability in their measurement that is regarded as the most problematic feature of brand asset disclosures. Yet, as the previous brief examination of the unit-of-measure postulate showed, the problems of measurement are fundamental to the nature of accountancy itself and consequently affect all assets. In this regard, to use an argument to the effect that brand assets cannot be measured with sufficient reliability is, prima facie, no different than in relation to any other asset and, as a result, can turn upon the empirical question of whether “sufficiency” has been achieved. For example, those who can remember the Queens Moat Properties’ hotel and other property devaluation in 1992, forcing the balance sheet into a negative equity situation, will comprehend that “sufficient reliability” is a relative term depending, for example, upon which chartered surveying firm is conducting the valuation. It is into this arena that the brand valuer advances his/her credentials along with other asset valuers such as chartered surveyors and actuaries. Credentials are important as the requirement for “sufficient reliability” may turn as much upon the credibility of who is valuing an asset as on how they value it. However, the issue of credibility is just as applicable to accountants as it is to brand valuers. For example, a change in the accounting rules from SSAP22 to FRS10 means that purchased goodwill is now disclosed as an asset with little conceptual underpinning being advanced as to its constituent nature as an “asset”. Nevertheless, the accountants’ credibility is established by national compliance with the new rule and the dominance of the profession in financial reporting. The accountants’ credibility remains intact providing the picture of economic reality portrayed by the accounting information is deemed to be sufficiently relevant and reliable to the users of it (right and left-hand branches of Figure 1, respectively) or it remains unchallenged by them. As doubts are raised about this view of reality, a reality where intangible assets remain largely undisclosed, it is incumbent upon the author to portray an alternative or additional view of reality to that triggered by transactions or events. This is undertaken using brand assets as a “vehicle” for change.

The recognition of the separable nature of brand assets In all of the Table 1 brand accounting instances, brand asset recognition occurred as an extraction from purchased goodwill,

Long Range Planning, vol 34

2001

475

to be capitalised separately from it (see Appendix A). These disclosures are contrary to the advice given to accountants in Exposure Draft 52 on Accounting for intangible fixed assets,30 which states brands are to be subsumed within purchased goodwill. Compliance with FRS10 has the same effect though the reason given is that brand assets cannot be measured with sufficient reliability to warrant their separable disclosure. However, such minority capitalisation practices may be supported by Hodgson et al.31 who state that brands are “… identifiable activities and not what we have defined here to be goodwill.” Tollington32 shows that the recognition of the nature of purchased goodwill as an asset has very little conceptual basis to it, other than as an application of an operating definition. The idea of extracting a brand asset, or any other intangible asset, from purchased goodwill is therefore conceptually unfounded; it is the idea of extracting a brand asset from a rule-created difference: “Goodwill is the difference between the value of a business as a whole and the aggregate of the fair values of its separable net assets”.33 (see also Appendix A and B). It follows that any accounting attachment of a brand asset to purchased goodwill which then remained for capitalisation purposes would be for the sole pragmatic purpose of utilising part or all of the latter’s transactionbased existence. The reasons for doing so have been speculated to include the desire to minimise reserve depletion, to increase the asset base for borrowing purposes as well as an inherent belief in brands as recognisable assets. It is also a further indicator of the robustness of the transactions or events-based asset recognition boundary and the lengths to which accountants will go to stay within it. Let us dwell on this point a little longer. If the linkage of brand asset recognition to purchased goodwill is conceptually unfounded it follows that something else must be restricting the widespread recognition of brand assets, particularly internallycreated brand assets, on UK balance sheets. Also, whatever is restricting the recognition of internally-created brand assets conversely has to be allowing for the existing accounting practice of recognising brands as assets, as currently extracted from purchased goodwill and evidenced in Table 1. And the only factor that appears to fit both situations is the definitional requirement for asset recognition to be derived from transactions or events. In this sense it may be regarded as restrictive. An alternative approach to intangible asset recognition based on transactions or events is that the existing transactions or events recognition boundary should be extended to include any legally separable asset.34 In respect of brand assets this is underpinned by the following brand asset definition: A brand asset is a name and/or symbol (a design, a trademark, a logo) used to uniquely identify the goods or services of a seller from those of its competitors, with a view to obtaining wealth in excess of that obtainable without a brand. A brand asset’s unique identity is secured through 476

Brand Asset Recognition

legal recognition which firstly, protects the seller from competitors who may attempt to provide similar goods and/or services and secondly, enables it to exist as an entity in its own right and therefore be capable of being transferred independently of the goods and/or services to which it was originally linked.35 The definition is constitutive of three professional views towards brands as assets. The first sentence is a synthesis of the recognition of a brand taken from the marketing literature and the wealth-creating potential of an asset, derived from the accounting notion of future economic benefits (see Exhibit 1). The

Exhibit 1. Definitions of brands, assets and trade marks Brands: 앫 “A brand is a name, term, sign, symbol or design, or combination of them which is intended to identify the goods or services of one seller to differentiate them from those of competitors.” (Kotler44) 앫 A brand is “… a name, term, design, symbol, or any other feature that identifies one seller’s goods or service as distinct from those of other sellers. A brand may identify one item, a family of items, or all items of that seller.” (Bennett45) 앫 “A brand is a recognised name associated with a product, which projects an image to the consumer such that he or she rates the product associated with the brand higher than other comparable products.” (Mullen and Mainz46) 앫 “A brand is a name, symbol, design or mark that enhances the value of a product beyond its functional purpose.” (Farquhar47) Assets: 앫 “An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.” (International Accounting Standards Committee48) 앫 “Assets are resources or rights incontestably controlled by an entity at the accounting date that are expected to yield it future economic benefits.” (Solomons6) 앫 “Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.” (Financial Accounting Standards Board9) 앫 “Assets are rights or other access to future economic benefits controlled by an entity as a result of past transactions or events.” (Accounting Standards Board7) Trade Marks Act 1994: Trade mark means any sign capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertakings. A trade mark may, in particular, consist of words (including personal names), designs, letters, numerals or the shape of goods or their packaging.

Long Range Planning, vol 34

2001

477

second sentence introduces the legal separability approach referred to later in this paper. Indeed, in this regard, if one were to look at the definition of a trademark, per the Trade Marks Act 1994, one would observe a number of similarities between it and the brand asset definition, above. This definition stands in sharp contrast to the definition of purchased goodwill, above, from which brand assets are sometimes extracted. The goodwill definition is simply an operating definition that tells one what to do. The need for a brand asset definition is partly supported by Wood52 who suggests that definition should be attempted because if we do not have some idea of brand phenomenology it is impossible to develop a reasonable model for valuation. Egginton53 argues that a central problem of reporting intangibles concerns the circumstances under which they should be treated as assets. The definition of assets in general is therefore relevant. Similarly, Napier and Power36 state that in principle we need to be able to identify an intangible as an asset before addressing the issues of whether the asset should be recognised by inclusion in the balance sheet and, if the asset is recognised, the amount at which it is so included. However, Napier and Power introduce the idea of “measurement separability” which effectively collapses all three stages of identification, recognition and measurement into one. In other words, if we can measure the resource in an acceptable manner, then it is difficult to resist the identification of the resource as an asset and its consequent recognition in financial statements. They argue that measurement separability implies that if we can measure the intangible, then the question of whether or not we can identify it as an asset is pre-empted. It is an argument which is rejected in this paper, first, for the reasons stated by Wood and Egginton and second, because the above brand asset definition addresses the initial identification stage prior to, and separately to, any subsequent measurement or valuation. Despite the logic of recognition before measurement on the basis of a brand asset’s legally separable status it is, nevertheless, relatively easy to bring closure to this position simply by reference to the indisputable subjectivity of the existing brand valuation methods. For example, Tweedie and Whittington37 state that the brand names problem also has an important valuation dimension: the degree of uncertainty surrounding valuation is a strong argument for not recognising this type of asset in the accounts. The process of measurement is observed to be the means of intangible asset recognition, not subsequent to it, and since it is rationalised to be insufficiently reliable in most respects the debate can be closed by reference to this issue alone. However, such an approach can tend to understate the importance of normative approaches to brand asset recognition and disclosure—a case of the ideal as distinguished from the actual. For example, the ideal or “what ought to be”, in respect of the earlier Glaxo example is that the intangible asset mainstays of its business ought to be disclosed on its balance sheet. It is at this point that one returns to the introductory statement as to the existence 478

Brand Asset Recognition

of a financial information gap and the need to close some of it. The argument being that as business increasingly recognises and uses intangibles, particularly internally-created ones, so too should the accounting profession recognise and disclose them. In this regard let us consider the case for the recognition and disclosure of brand assets based upon a “legal separability” approach to asset recognition. Brand assets, like most intangibles, rely upon an organised, economically-driven society for their existence. Tangible assets can exist outside this context but intangible assets rely on society decreeing that they exist and then setting up mechanisms to protect them, for example, by the legal trademarking of a brand and the courts system to enforce their recognition and protection. There have been many notable legal cases in respect of the “Jif Lemon”, “Lego”, “Puffin” and “Champagne” brand names, where companies have felt the need to protect their investment in them. In the process they have reasserted the legal responsibility of management in terms of the stewardship of assets, in this case, intangible ones. Since any business can utilise this legal process independently of any asset recognition criteria afforded by the accounting profession, the general recognition of a brand is not necessarily dependent on whether it is purchased or internally created by a business over time. This is the socially-created legal reality and it is one that accountants choose not to reflect by the disclosure of brand assets on the balance sheets. Such circumstances reinforce a normative approach which seeks to justify what is wrong with the existing approach to brand asset disclosures and what ought to replace it. The problem of separability is particularly acute in the valuation of corporate brand names, especially in service industries. According to Arthur Andersen,38 in these circumstances either the intangible asset must be narrowly defined (e.g. a trademark) or broadly defined to include a “package” of supporting intangible assets (e.g. key people, knowhow and systems), or the valuer may conclude that it cannot be valued as a separable asset. It is the “narrowly defined” option that is presented in the brand asset definition above. However, it is only narrow in respect of the marketing recognition of a brand since many marketers would argue that a brand is more than just its trademark, comprising additional attributes such as loyalty, awareness and perceived quality. It is not narrow in the accounting sense of the recognition of a brand as a separable asset, since asset recognition based on a legally separable existence represents a broadening of the existing transactions or events basis for the recognition of an asset. Barwise et al.39 reject the legally separable basis for brand asset recognition, but in doing so they would, perhaps, reject it on the basis of Arthur Andersen’s “broadly defined” basis. “Almost invariably, the value of the brand is intimately bound up with other intangibles (reputation, know-how, skills, relationships) which are not legally separable from the business as a whole …. Even if there is some way of defining a brand as something legally separable, it may also be impossible to find a

Long Range Planning, vol 34

2001

Intangible assets rely on society decreeing that they exist

479

valid (in terms of economic value) and objective way of separating its incremental profit or cashflow from that of the rest of the business”. The issue of a valid measurement method is outside the scope of this paper and is, anyway, much broader than in respect of incremental profits or cashflows. To repeat, it is concerned with the issue of asset and brand asset definition and recognition, which is logically prior to measurement. A counter argument exists with regard to the apparent absence of transactions or events in the recognition of internally-created brand assets. Namely, that they can, if necessary, be captured within the existing transactions or events-based asset recognition boundary. It can be argued that they are the result of many individual transactions that happen to have been expensed instead of capitalised. However, the idea of capitalising the aggregate of thousands of past brand-related expenses does not sit well with an asset definition requiring the capitalisation of future economic benefits (see Exhibit 1). Also, establishing which particular brand asset-related expenses should be capitalised is highly problematic. Further, it is also an unnecessary task because recognition of a brand asset can be established on some legally separable basis other than a transaction, for example, through statutory registration of a trademark, and measurement subsequently based upon an independent valuation. Such an approach is underpinned by the brand asset definition presented earlier in the paper. Lastly, while accountants could probably attempt to justify the capitalisation of internally-created intangible assets if they chose to, the practical reality is that in general they do not. They are therefore outside the existing asset recognition boundary if only on pragmatic grounds, as evidenced by the limited number of Table 1 companies that capitalise brand assets. The dominance of a transaction or events-based boundary is derived from its definitional status: “Organisational researchers have endless theoretical debates on what the boundaries are or whether there are any: the accountants settle the matter by definition, and acquiring boundaries means, for an organisation, acquiring reality.”40

Conclusion According to Knowles,41 brands sit uncomfortably in the financial world, where deductive reasoning and rationality reign supreme. By contrast, brands belong to a fuzzy world in which emotion and reason, perception and reality happily coexist. As an abstraction, the accounting view of business reality is never fully complete. However, the argument presented in this paper is that Meyer’s defined reality with regard to the existing asset recognition boundary is now too restrictive and should, perhaps, be broadened to embrace any legally separable asset. This is inclusive of those assets that are typically recognised contractually as part of a business transaction. “Legal separability” would probably provide sufficient audit evidence for recognition as an asset but, currently, insufficient reliability as regards measure480

Brand Asset Recognition

ment, particularly if the accounting profession remains insistent upon the transaction-based initial recognition of an asset. This paper presents an argument for a rethink about this situation, to contemplate accepting at the initial recognition stage of an asset, the notion of an asset’s legally separable identity and an independent valuation. No doubt, such an approach would open up the debate about the reliability of accounting measurement methods in general, and specifically in respect of brand assets. However, does the accounting profession have any option but to embrace this debate? It can cling on to the cost derived from the transactionbased initial recognition of an asset, however, the widening gap between accounting book values and market values makes this position untenable if the balance sheet is to remain credible in the long run. Consider the changes in tangible asset rights negotiated and imposed over the past few decades in respect of ocean mineral deposits, Zimbabwe’s “white” farm seizures, governmental restrictions on access to common grazing land and water wells in pastoral Africa and so on. Consider, also, the changes intangible asset rights associated with genetic engineering, software, Kyoto Summit “carbon credits” (pollution rights), EU agricultural quotas and so on. The point here is that, first, the nature of an asset, particularly an intangible asset, changes as society changes and it is not necessarily conditional upon transactions or events for recognition of its wealth-creating potential. Second, the issue of intangible asset measurement is logically subsequent to the issue of intangible asset recognition and the two issues should not be collapsed together so that a measurement becomes the means of recognition. Otherwise, one cannot be sure about what one is measuring, particularly, where such assets are inseparable from the other assets of a business. Finally, the issue of reliability of accounting measurement methods should be addressed again for all assets, including intangibles, and should not be used as a reason to decline their recognition and disclosure in published financial statements. Most of the calls for change in intangible brand asset recognition occur outside the accounting profession, notably by brand valuation companies. This paper is different in that it attempts to justify change from within the accounting profession. The author is not alone in this regard: Arthur Andersen also advances the case for such recognition, though not specifically on the grounds presented in this paper. Despite FRS10, the disclosure of brand assets is a practical reality embraced by a minority of finance directors and encouraged by others outside the accounting profession. Therefore the brand accounting debate can, to some extent, be reduced to the level of politics with each side of the disclosure/non-disclosure divide promoting their case. This paper seeks to keep brand asset disclosure on the agenda of standard setters by highlighting the restrictive nature of the existing criteria used in the accounting recognition of assets, otherwise it is likely that the financial information gap will get bigger as

Long Range Planning, vol 34

2001

481

intangibles increasingly take centre-stage as the principal wealth creators for many businesses.

Appendix A The accounting changes in purchased goodwill and brand accounting practice are illustrated by the following example: A company acquires another company, paying £100m for tangible assets valued at £60m and brands valued at £20m: Balance Sheets

Assets (£m): Cash Other Tangible Assets Goodwill Brands Financed by (£m): Capital Reserves

A

B

C

D

Pre Acq.

Goodwill Asset

Goodwill Brand and Brand Asset Write-off

Goodwill and Brand Asset

£500 £500

£400 £560

£400 £560

£400 £560

£400 £560

£20

£20 £20

£800 £180

£800 £200

£40

£800 £200

£800 £200

£800 £160

E

Column A shows the pre-acquisition position of a company. Column B shows the post-acquisition position of that company with purchased goodwill being regarded as an asset (usually depreciated). This is now the only allowable accounting practice per FRS10 and it brings the UK “into line” with the US and dominant European accounting practices. If one regards goodwill, in common with tangible assets, as a source of future revenue earning potential then one may subscribe to this view of the balance sheet. However, if purchased goodwill is regarded as too fickle in nature and offering little certainty as to the amount and duration of future revenues then one may seek to write it off as quickly as possible, usually to reserves, as shown in Column C above. This was, prior to the implementation of FRS10, the dominant allowable method under the UK Statement of Standard Accounting Practice No. 22 (ASC, revised 1989, p8). So, something that has not generally been regarded as an asset (Column C) for at least a decade now suddenly becomes an asset (Column B) at least from a disclosure viewpoint. Much of the debate in the accounting literature has focused upon merits of the above Column B and C accounting practices, a debate that Murphy42 describes as something of an accounting “sideshow” from which most non-accountants are excluded. During the 1990s accountants became increasingly aware of the size of goodwill and the effect that the above Column C 482

Brand Asset Recognition

practices were having upon balance sheet reserves. In some cases it resulted in the disclosure of negative reserves and even negative net worth. A way of minimising reserve depletion and increasing the asset base of a company was to extract from the purchased goodwill written-off to reserves an amount that related to brand assets and to show this as a separate asset on the balance sheet (Column D, above). However, with the introduction of FRS10, those few Column D companies who separately disclosed brand assets are now required to adopt the Column E practice of capitalising both purchased goodwill and brands. The desirable effect, from ASB’s viewpoint, is that there is now no material financial difference between Columns B and E except from a presentational stance. It is important to note that the brand asset values shown in Column D above only exist within the context of purchased goodwill. The £40m purchased goodwill figure therefore represents an upper and, sometimes, unrealistic limit to any brand asset valuation extracted from it. Also, because the above Column D practice does not recognise brand assets arising independently of purchased goodwill a situation can arise where some purchased brands are included on the balance sheet and other non-purchased, internally created brands are excluded from it. For example, Grand Metropolitan (now part of Diageo) includes the purchased “Burger King” brand on the balance sheet but excludes the home-grown or internally created “Croft” sherry brand.

Appendix B. Purchased goodwill attributes 1 The existence and value of purchased goodwill is entirely dependent upon the circumstances of a transaction for the purchase of a business rather than being based upon recognition of its nature and/or resource. These circumstances mean that recognition is based upon a definitional or ruledriven measurement exercise that, unusually, is capable of producing a negative as well as a positive goodwill asset. No other “asset” can appear on either side of the balance sheet simply because of the way it has been measured. 2 The rule-driven measurement of purchased goodwill is only valid for one point in time, that is, at the date of the acquisition of a business. Thereafter, the amount of goodwill will vary according to operating and economic circumstance, strategic decisions and other unknown variables, that is, it will become “… so susceptible to variation as to have no enduring quality, such as durable assets, nor any exchange value to a going concern …”43 3 As a “difference” arising from a transaction, purchased goodwill is inseparable from the other assets acquired as part of a purchase for a business and, as a result: (a) unlike most assets, no one in their right mind would purchase goodwill separately from the other assets of a business;

Long Range Planning, vol 34

2001

483

The author gratefully acknowledges the financial support of David Haigh, Chief Executive of Brand Finance in the preparation of this paper and the comments of two anonymous referees on an earlier draft.

(b) unlike most assets, purchased goodwill is highly unlikely to be used to settle debts or used as collateral to raise loans. 4 It arises from an operating rather than a constitutive definition, which simply tells one what to do, not what constitutes its nature or why it should be accounted in a particular way.

References 1. J. Knowles, Protecting brands from downside risk, Professional Investor 17 (2000). 2. Brand Finance Plc, Brand Finance Report 1999, London (1999). 3. R. Hall, The contribution of intangible resources to business success, Journal of General Management 16(4), 41–51 (1991); R. Hall, The strategic analysis of intangible resources, Strategic Management Journal 13, 135–144 (1992); P. Mather and K. Peasnell, An examination of the economic circumstances surrounding decisions to capitalize brands, British Journal of Management 2, 151–164 (1991); G. Dowling, Developing your company image into a corporate asset, Long Range Planning 26(2), 101–109 (1993); F. Kennedy, Intellectual capital in valuing intangible assets, Team Performance Management 4(4), 121–137 (1998); N. Horne, Putting information assets on the board agenda, Long Range Planning 31(1), 10–17 (1998); J. Roos, Exploring the concept of intellectual property, Long Range Planning 31(1), 150–153 (1998). 4. D. Oldroyd, Accounting and marketing rationale: the juxtaposition within brands, International Marketing Review, 11(2), 33–46 (1994); L. Wood, Brands: the asset test, Journal of Marketing Management 11(6), 547–570 (1995); L. Wood, Added value: marketing basics?, Journal of Marketing Management 12, 735–755 (1996); R. Ward and R. Perrier, Brand valuation: the times are a changing, Journal of Brand Management 5(4), 283–289 (1998); J. Davidson, Transforming the value of company reports through marketing measurement, Journal of Marketing Management 15, 757–777 (1999). 5. Chartered Institute of Marketing, A view from the Institute, Marketing Business HHL, (1993) p. 20. 6. D. Solomons, Guidelines for Financial Reporting Standards, Prepared for the Research Board of the Institute of Chartered Accountants in England and Wales (1989). 7. ASB, Revised Financial Reporting Exposure Draft: Statement of Principles for Financial Reporting, Accounting Standards Board, (1999) pp. 1–108. 8. ASB (1999) p. 50 (see Reference 7). 9. FASB, Statement of Financial Accounting Concepts No. 6, Elements of Financial Statements, Financial Accounting Standards Board, Stamford, CT (1985). 10. ASB (1999) p. 64 (see Reference 7). 11. ASB (1999) p. 63 (see Reference 7). 484

Brand Asset Recognition

12. ASB, Financial Reporting Standard 10: Goodwill and Intangible Assets, Accounting Standards Board, (1997) pp. 1–77. 13. There is a circular argument here in that without the computer staff the software programs would not exist and without the software programs there would be no justification for capitalizing computer staff costs. However, one needs to distinguish between “intellectual creativity”, which resides with the individual, and “intellectual capital” where the fruits of intellectual creativity are given a separable identity physically (a document of encoded disk, for instance) and/or legally (copyright, patent, trademark and so on). Intellectual capital endures (an asset?) while intellectual creativity is ephemeral (an expense?). 14. D. Quah, Weightless economy packs a powerful punch, Independent on Sunday 4 (18 May 1997). 15. The Economist 94 (12 June 1999). 16. S. Kennedy, Goodwill, brands and other intangibles, Conference documentation 24 April 1998, IBC Conferences, pp. 2–27. 17. Accountancy Age 11 (1 April 1999). 18. ASB, Financial Reporting Exposure Draft: Statement of Principles for Financial Reporting, Accounting Standards Board, p. 53 (1999). 19. D. Egginton, Towards some principles for intangible asset accounting, Accounting and Business Research 20(79), 193– 205 (1990). 20. The Lex Column, Financial Times 26 (29 July 1998). 21. A. Belkaoui, Accounting Theory, 3rd edn., Academic Press, New York (1992). 22. D. Koeppen, Using the FASB’s conceptual framework: fitting the pieces together, Accounting Horizons, American Accounting Association 2(2), 18–26 (1988). 23. FASB, Statement of Financial Accounting Concepts No. 5 Recognition and Measurement in Financial Statements of Business Enterprises, Financial Accounting Standards Board, New York (1984). 24. ASC, Statement of Accounting Practice No. 16 Current Cost Accounting, Accounting Standards Committee (1980). 25. R. Chambers, Metrical and empirical laws in accounting, Accounting Horizons, American Accounting Association 5(4), 1–15 (1991). 26. R. Kaplan and D. Norton, The balanced scorecard — measures that drive performance, Harvard Business Review (January–February), 71–79 (1992). 27. K. Hooper and M. Low, Representation in accounting: the metaphor effect, ACCCA Fourth Annual Conference at Cardiff Business School, 6–7 July (2000). 28. R. Hines, Financial accounting: in communicating reality, we construct reality, Accounting Organisations and Society 13(3), 251–261 (1988); R. Hines, The FASB’s conceptual framework, financial accounting and the maintenance of the social

Long Range Planning, vol 34

2001

485

29.

30. 31.

32.

33. 34. 35.

36.

37.

38. 39. 40.

41. 42. 43. 44. 45. 46. 47. 48.

49. 486

world, Accounting Organisations and Society 16(4), 313–331 (1991). M. Power, The politics of brand accounting in the United Kingdom, The European Accounting Review 1(1), 39–68 (1992). ASC, Exposure Draft 52: Accounting for Intangible Fixed Assets, Accounting Standards Committee, (1990) p. 10. A. Hodgson, J. Okunev and R. Willett, Accounting for intangibles: a theoretical perspective, Accounting and Business Research 23(90), 138–150 (1993). T. Tollington, Separating the brand asset from the goodwill asset, Journal of Product and Brand Management 7(4), 291– 304 (1998). ASC, SSAP22 (revised): Accounting for Goodwill, Accounting Standards Committee, (1989) pp. 1–15. T. Tollington, What are assets anyway? Some practical realities, Management Decision 36(7), 448–455 (1998). T. Tollington, Brands: the asset definition and recognition test, Journal of Product and Brand Management 7(3), 180– 192 (1998). C. Napier and M. Power, Professional research, lobbying and intangibles: a review essay, Accounting and Business Research 23(89), 85–95 (1992). D. Tweedie and G. Whittington, Financial reporting: current problems and their implications for systematic reform, Accounting and Business Research 21(81), 87–102 (1990). A. Andersen, The valuation of intangible assets, Economist Intelligence Unit, (1992) pp. 1–104. P. Barwise, C. Higson, A. Likierman and P. Marsh, Accounting for brands, ICAEW/LBS, (1989) pp. 1–84. J. Meyer, On the celebration of rationality: some comments on Boland and Pondy, Accounting, Organisations and Society 235–240 (1983). J. Knowles, Brands and the balance sheet, Professional Investor 14–19 (1999). J. Murphy, Brand valuation — not just an accounting issue, ADMAP, NTC Publications (April), 36–41 (1990). R. J. Chamber, Accounting Evaluation and Economic Behavior, Prentice-Hall, Englewood Cliffs, NJ (1966), p. 103. P. Kotler, Marketing Management, 4th edn., Prentice-Hall, Englewood Cliffs, NJ (1980). P. D. Bennet, Dictionary of Marketing Terms, American Marketing Association, Chicago (1988). M. Mullen and A. Mainz, Brands, bids and balance sheets, Acquisitions Monthly (April), 24–27 (1989). P. H. Farquhar, Managing brand equity, Marketing Research 1(3), 24–33 (1989). International Accounting Standards Committee, Framework for the Preparation and Presentation of Accounting Statements, (1989) p. 9. J. Davidson, Transforming the value of company reports

Brand Asset Recognition

50. 51.

52. 53.

through marketing measurements, Journal of Marketing Management 15, 757–777 (1999). T. Tollington, The brand accounting side-show, Journal of Product and Brand Management, 8(3), 204-218. R. Chambers, Metrical and empirical laws in accounting, Accounting Horizons, American Accounting Association 5(4), 1–15 (1991). L. Wood, Brands: the asset test, Journal of Marketing Management 11(6), 547–570 (1995). D. Eggington, Towards some principles for intangible asset accounting, Accounting and Business Research 20(79), 193– 205 (1990).

Long Range Planning, vol 34

2001

487