What is ‘Brand Valuation’?

Brand valuation is the job of estimating the total financial value of the brand. Like the valuation of any product, of self review, or conflict of interest if those that value the brand also were involved in its creation

It gives the brand identity of the product in the market and can be in the form of a word or symbol or unique or special design of that product, and history shows that discrimination trademarked Branding fundamental and decisive part of the initial success of a product within the market and longevity.

And the rights of trademark ownership concept in the management accounting as permitted and treated as an asset of the brand assets. And the treatment of the brand as an asset is it can be quite understandable, since it is investigating the company's advantage is expected to increase the wealth of shareholders.

Brand valuation

There are direct and clear way to estimate the value of a brand which determine the amounts spent on development, but that this assessment can be misleading because of the changing of the time value of money. And so it is advisable to conduct the analysis of the net present value (NPV), which we'll cover later. It will correct the calculation of NPV this time distortion.

Other ways to estimate the value of brands include:

Appreciate what another company be willing to pay a peer brand.

Keeping the profit and loss accounts for each brand.

Calculated marketing expenses to date and estimated future expenditures to maturity in the product life cycle.

Information relating to the performance of the brand, such as market health and customer loyalty.

The accounting treatment of trademarks in the small to medium-sized enterprises:

The brand regarded as one of the company's assets associated with its own problems. The most important measurement. They have formed how to measure assets challenge for accountants since the creation of measurement. They have formed how intangible assets measurement challenge for accountants since the creation of the concept of "brand" capitalized and recognized in the balance sheet in the eighties.

The term "cap" to the recognition of one of the expenditure items in the balance sheet as an asset rather than recorded in the profit and loss expense account.

In general, and for accounting purposes in small enterprise to medium-sized (SME), the amounts spent on a brand should be treated as an asset at a significant acquisition of another company. It should then balance sheet item this consumption over the estimated life of the brand. And consumption is accounting entry lowers originally moral value in the profit and loss account.

For example: it was 100 thousand pounds to acquire a brand spending. It is envisaged that the brand will enter the "neglect" stage in the product life cycle after ten years. And balance sheet that begin with 100 thousand pounds as an asset, it should be in contradiction with the value of the asset each year for ten years, with the recognition of the consumption in the list of profit and loss every year.

There remains a controversial element is whether the so-called trademark "locally produced" Home Grown should be capitalized. For many companies. There is this approach which takes its standard financial reporting No. 10 (FRS 10) logical sense from an accounting point where the brand - for many companies - have an improved sales impact on the long term. This is the definition of origin.

In marketing , Brand valuation is the process used to calculate the value of brands. Historically, most of a company’s value was in tangible assets such as property, stock, machinery or land. This has now changed and the majority of most company’s value is in intangible assets, such as their brand name or names. The Guinness brand would not be Guinness without the genuine recipe and production process. This more holistic view is consistent with the opinion that brand is a much broader and deeper experience than the logo and associated visual elements.

There are two critical questions to answer in brand valuation.

The first is exactly what is being valued. Are we valuing the trademarks, the brand or the branded business?

The second important question is the purpose of the valuation.

An important distinction can be made between technical and commercial valuations.

Technical valuations are generally conducted for balance sheet reporting, tax planning, litigation, securitisation, licensing, mergers and acquisitions and investor relations purposes. They focus on giving a point in time valuation that represents the value of the trademarks or of the brand as defined above.

Commercial valuations are used for the purposes of brand architecture, portfolio management, market strategy, budget allocation and brand scorecards. Such valuations are based on a dynamic model of the branded business and aim to measure the role played by the brand in influencing the key variables in the model. We recommend that the starting point for every valuation – whether technical or commercial - should be a branded business valuation. This provides the most complete understanding of the commercial context of the brand. A branded business valuation is based on a discounted cash flow analysis of future earnings for that business discounted at the appropriate cost of capital. The value of the branded business is made up of a number of tangible and intangible assets. Trademarks are simply one of these and brands are a more comprehensive bundle of trademark and related intangibles.

Brand valuation is the process used to calculate the value of brands

Brand valuation is the process used to calculate the value of brands. Historically, most of a company's value was in tangible assets such as property, stock, machinery or land. This has now changed and the majority of most company's value is in intangible assets, such as their brand name or names.

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Brand valuation is a realistic sketch of the book value and the market value of the brand.

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The main brand valuation methodologies are:

1. Income based brand valuation methods

• Relief from royalty method: this brand valuation method is based on how much the brand owner would have to pay to use its brand if it licensed the brand from a third party. It uses discounted cash flow analysis (DCF) to capitalise future branded cash flows

• Excess-earnings method: this brand valuation methodology calculates the earnings above the profits required to attract an investor – which uses the estimated rate of return based on the current value of the assets employed. These excess earnings are assumed to be attributable to the intellectual property, or brand.

• Price premium method: this brand valuation method is based on a capitalisation of future profit stream premiums attributable to a business’ brand above the revenues of a generic business, without a brand.

• Capitalisation of historic profits method: the brand valuation method is based on the capitalisation of profits earned by the brand.

2. Market based brand valuation methods

• P/E ratios method: the P/E (price to earnings) brand valuation method multiples the brand’s profits by a multiple derived from similar transactions of profits to price paid based on the value of reported brand values.

• Turnover multiples method: this brand valuation method multiplies the brand’s turnover by a multiple derived from similar transactions.

3. Cost based brand valuation methods

• Creation costs method: this brand valuation methodology estimates the amount that has been invested in creating the brand.

• Replacement value method: this brand valuation method estimates the investment required to build a brand with a similar market position and share.