In a piece for my accounting body (ACCA) I discuss the problem of what to do in respect of brands on the balance sheet. My intention is to help foster a dialogue between (financial) accountants and marketers. Too many marketers seem to think accountants are merely there to frustrate marketing’s plans, not realizing that accounting for marketing is a very challenging activity. Marketers feel cheated by accountants but don’t engage in developing a better solution than we currently have. (Which, simplifying somewhat, is that purchased brands are accounted for at an estimated purchase price but in-house generated brands aren’t — the spending on band building is immediately expensed as marketing with short term aims is).
On the other hand too many accountants seem to think that accounting rules are set in stone; handed down from some all-knowing source. “You can’t do that” is not a valid answer to a marketer asking whether brands could be better accounted for than they currently are. Just because accounting rules say something currently doesn’t mean that the rules can’t be improved if we all think about them. I am optimistic that marketing can be better accounted for. (Please see the work of MASB, the Marketing Accountability Standards Board).
Accountants should be able to meaningfully justify their rules to those who question them. Of course, not everyone will always agree but a minimum should be at least recognizing that the current approach comes with severe problems. “Treating marketing investments as expenses discourages long-term marketing strategies, rewarding instead the short-term gimmicks that give marketers a bad name. Furthermore, unrecorded marketing assets are often abused. Valuable customers are alienated by annoying trick fees. Businesses suffer economic losses as profitable customers vow never to use them again, while financial reports show short-term profits as the fees trickle in.” (Bendle, 2017).
Hopefully we can improve the lines of communications with accountants.
Read: Neil Bendle (2017) The knotty problem of brand valuation, Accounting and Business magazine (International Edition), September, http://www.accaglobal.com/middle-east/en/member/member/accounting-business/2017/09/corporate/brand-valuation.html