INTHEBLACK March 2025 - Magazine - Page 21
“How do you recognise in the profit and loss if you say we’ve expanded globally,
brand recognition is now higher, and we now revalue our brand up by 50 per cent?
Does that mean that your profit and loss suddenly improves significantly because
you’ve revalued your brand?”
SHAUN STEENKAMP CPA, TRANSURBAN
“In some respects, the organisations
that develop these things are currently at
a disadvantage. They’ve got this great asset
that they can’t recognise in their financial
statements, which could be recognised
indirectly if they were to sell their business
to someone else.
“[In that case] the buyer would be able
to have the same asset sitting there and
reflected on their balance sheet as part
of their goodwill.”
THE HORIZONS OF FINANCIAL REPORTING
A CPA Australia research paper published
in 2024 titled The horizons of f inancial
reporting — Part 2: Investor perspectives
and measurement uncertainty concluded
that investors support expanded reporting
of intangible assets.
This includes wider recognition
of intangible assets in general-purpose
financial statements, provided that
standardised (i.e. comparable and
auditable) measurement techniques
can be established and transparently
communicated via note disclosures.
“A central debate about how to
communicate information to investors
about intangible assets is whether this
is communication best achieved through
recognition and measurement or note
disclosure,” the paper found. “This is
particularly relevant in the context of
internally generated intangible assets,
which (aside from some limited exceptions,
such as development costs) are not generally
recognised in an entity’s statement of
financial position, in part because they do
not have a cost that is reliably measurable
given they do not result from an exchange
transaction.”
CPA Australia found that with
appropriate scope, an accounting standard
mandating an expansion to the recognition
of intangibles could enhance the relevance
of general-purpose financial statements
to investors.
“While policymakers are moving in
the right direction, several issues require
deeper consideration. For intangibles,
policymakers could consider further
disentangling recognition and measurement.”
Ram Subramanian, CPA Australia’s
financial reporting lead, says there is a huge
challenge in putting a correct value on certain
intangible assets, including brands.
“Of course, when you are looking
at the buying and selling of businesses,
people do value them. So, if you are selling
a business which includes a brand value
associated with it, the buyer will come to
a value somehow, and valuation experts do
have techniques that they use to value brands.
“Financial reporting inherently has
boundaries to it,” Subramanian says.
“The moment you start pushing against
the edges, it starts becoming more and
more difficult. And that’s exactly where
intangibles are, because it is hitting those
boundaries and trying to go beyond what
financial reporting has traditionally done.”
PUTTING A VALUE ON BRANDS
OUTSIDE FINANCIAL REPORTING
Mark Crowe is the Australian managing
director of global brand valuation consultancy
Brand Finance, which specialises in valuing
intangible assets, especially brands.
He says that, based on Brand Finance’s
calculations, Australian companies are
currently holding A$1.4 trillion in intangible
assets, of which A$430 billion is bound up
in brand values.
“They’re compelling numbers in terms
of measuring, understanding and managing
that value and its impact on the Australian
economy,” Crowe says.
Placing a value on a brand is far from
straightforward. Crowe explains that Brand
Finance looks at a range of measures,
including the market strength of a brand
against its competitors, customer and
stakeholder perceptions of the brand,
and its performance in financial terms,
intheblack.cpaaustralia.com.au 21
