What is the value of a ‘brand’, lately, anyway?

The ‘market’ has a way of factoring in the brand value, so to include an add-on component in the books is in effect taking a charge on the same asset twice, and that is dishonesty in any language

If the accounting firms of the world are to be believed, then the value of a ‘brand’ cannot only be estimated in terms of cash values, but can also be entered on bottomlines and in balance sheets. Taking this one logical step forward, this bit of magic can then be sold as close to the hard fact to otherwise sceptical bankers, That these are more or less, with some changes in their own brand names, the same accounting firms responsible for wonderful valuations like the ones on Enron or closer home Satyam, is not missed out by most.
 
But regardless, the juggernaut of “brand value” rolls on, regardless.
 
For example, the “brand value” of Coca-Cola used to top the charts till 3-4 years ago, but has recently seen the rankings notch down to the higher teens, while the ‘value’ itself appears to have lost about 20% of its bubble in that time period. These are in scores of billions of dollars, by the way, and separate from valuations on ‘goodwill’, and both of these find their way on to balance sheets of listed companies, Seldom, however, will you see them discussed by analysts or at the meetings which make or break markets.
 
Here in India, Kingfisher’s brand value was estimated to be at around Rs4,000 crore, as estimated by Grant Thornton—which value was acceptable to banks in India led by State Bank of India (SBI)—and that was then used as collateral for, you guessed it right, a loan of a higher amount. The same valuation is, however, not applied when a successful public sector undertaking is hived off in the name of liberalisation or privatisation. How much, for example, would the brand value of Maruti have been, and why was it not applied over and above the numbers then achieved?
 
The ‘market’ has a way of factoring in the brand value, so to include an add-on component in the books is in effect taking a charge on the same asset twice, and that is dishonesty in any language. Investors are advised to look at balance sheets carefully for tell-tale signs like this on the asset side.

(Veeresh Malik started and sold a couple of companies, is now back to his first love—writing. He is also involved actively in helping small and midsize family-run businesses re-invent themselves. Mr Malik had a career in the Merchant Navy which he left in 1983, has qualifications in ship-broking and chartering, a love for travel, and an active participation in print and electronic media as an alternate core competency, all these and more.)

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