Skip to content

Marketing Thought

Clarifying management/marketing theory

Menu
  • Neil Bendle
  • Popular Marketing Metrics: How Not To Mess Them Up
  • Marketing Metrics 4th Edition Book
  • Marketing PhD Applications
  • Advice For The Marketing Academic Job Market
  • Sustainable Marketing Strategy
  • Public Policy, Behavioral Economics and Marketing
Menu

Accounting For Brands

Posted on April 21, 2017April 6, 2021 by neilbendle

In a 2003 piece Tony McAuley discussed the history of accounting for intangible values. He interviewed Michael Schurch, CFO of RHM (Rank Hovis McDougall). They discussed the company’s decision to add the value of brands to the balance sheet back in 1988. This created a bit of a stir at the time, and has influenced accounting for marketing, specifically accounting for brands, going forward.

Brands As A Defensive Asset

McAuley (2003) noted that “the company didn’t expect the attention it received…” The decision to add the brands was a “defensive mechanism in a takeover situation”. Asset-stripping was a big concern at the time. RHM’s managers were afraid that their company wasn’t fully valued. The company’s massive marketing/advertising was a big bet of resources but didn’t show in the accounts. What is more the advertising was surely successful it was certainly highly memorable. It had helped launch the careers of directors Alan Parker and Ridley Scott. British people of a certain age will forever associate Dvorak’s New World Symphony with Hovis Bread. RHM’s advertising was a serious part of the company’s activities. So why not show the assets build by the advertising on the balance sheet?

The company asked Interbrand who supplied a valuation. The reported value of RHM soared, the raiders were scared off and the rest is history. (Actually accounting regulators were not happy but that is another story).

Accounting For Brands. The Hill In the Hovis Advert, Photo By Sean -- https://www.flickr.com/photos/skez/31533377/
Gold Hill, Shaftesbury: The Hill In The Hovis Ad, Photo By Sean — https://www.flickr.com/photos/skez/31533377/

Accounting For Brands: Does It Matter What You Do?

Schurch explains that “Traditional finance directors would look to reduce costs all the time–‘we can always improve short-term profitability by turning off the support tap. But we assess it as an investment.” Understanding the value of the brand “.. is about encouraging the right behaviour in the business”. (McAuley. 2003)

Not everyone buys the idea of putting brands onto the balance sheet. Even if they don’t reach the balance sheet they can have value. The act of creating the valuations can be useful in themselves for understanding internal investment decisions. Maybe the valuations are even useful when securing external financing. When a firm values the assets these can be borrowed against if the lender chooses to treat them as such. At its best brand valuations means that “..finance understands what we [marketing] are doing” (McAuley, 2003). This is an important benefit at time of budget setting.

For more on brand valuation see here.

Read: Tom McAuley (2003) Brand Family Values, CFO Europe Magazine, December 31, http://ww2.cfo.com/accounting-tax/2003/12/brand-family-values/

Share on Social Media
x facebook linkedin reddit

  • Escape From Poverty And Disease
  • Comprehensive Guide To Drawdown Solutions
  • Must Firms Maximize Shareholder Value?
  • People Aren’t Getting Worse

MASB’s Universal Marketing Dictionary

Need a marketing definition? Use MASB’s Universal Marketing Dictionary. Click for the MASB Universal Marketing Dictionary

Pages in Marketing Thought

  • A Plea About Language Used In Marketing
  • Advice For The Marketing Academic Job Market
  • Behavioral Econ For Kids: The Cartoon Book
  • Data Visualization Advice
  • Machine Learning (ML) And Marketing: What Should You Know?
  • Marketing In The Movies
  • Marketing Metrics 4th Edition Book
    • Chapter of Marketing Metrics 4th Edition, Free Sample
  • Marketing PhD Applications
  • Marketing Thought Website Data
  • Neil Bendle
  • Popular Marketing Metrics: How Not To Mess Them Up
    • Brand Valuation: Progress But Lots More Needed
    • Customer Equity: Nice Idea, Bit Of A Mess In Execution
    • How To Use, And Misuse, Customer Lifetime Value (CLV)
    • Is ROI The Most Abused Term In Marketing?
    • Market Share: Always An Indicator Never A Target
    • Marketing Accounts: A Better Way To Measure Marketing Performance
    • Measuring Competition With The Bendle Panda Index
    • Net Promoter Score: Sadly Not As Magical As Supporters Suggest
    • Profit Measurement: Choose Your Own Level Is Problematic
    • Tobin’s Q: Why Academics Should Listen To Managers
    • Total Q, A New Improved Tobin’s Q? Not By Much
    • Value Of A Like: Do Not Use For Budgeting
  • Public Policy, Behavioral Economics and Marketing
  • Recommended Books
  • Sustainable Marketing Strategy
    • B Corp Research Papers
    • Marketing Strategy
      • Measuring Culture Is A Challenge, But Don’t Be Silly
      • Rationality And Marketing Strategy
      • Segmentation, Targeting and Positioning
      • Strategy And Evolutionary Thinking
  • Sustainable Marketing Strategy Cases
©2023 Marketing Thought | Built using WordPress and Responsive Blogily theme by Superb
Go to mobile version