What is your brand really worth?

2012-01-17 00:00

THE intangible assets of a business, including its brands, are often said to be its most valuable assets. However, as brands are intangible assets, convincing others of the actual monetary value of a brand depends on acceptance and credibility of the method of valuation.

In a significant development for brand valuation methodology, the International Standards Organisation (ISO) recently published an international standard for monetary brand valuation — ISO 10668:2010.

This form of brand valuationspecifies uniform requirements and procedures for monetary brand value measurement.

“Unsurprisingly, the ISO standard rubber-stamps the three main methods of brand valuation that have commonly been used by legal practitioners and financial services professionals to evaluate brands. ISO 10668:2010 states that brands may be valued by applying the income, market or cost approaches,” said Christophe van Zyl, senior associate at Intellectual Property (IP) law firm Adams & Adams.

According to Van Zyl, the ISO guideline is significant for a number of reasons. Among these is uniformity. “There have always been personal preferences of the approaches by individual practitioners when measuring brands. ISO 10668:2010 creates uniform procedures and methodologies for each of the three main methods of brand valuation,” said Van Zyl.

Practicality also constitutes an important part of the evaluation. It is now possible to create an acceptable standard of valuation for both the seller and the purchaser by stating that the value of the brands shall be determined according to a particular method and in accordance with specific guidelines in ISO 10668:2010.

“ISO 10669:2010 should be embraced by authorities, businesses, auditors and even business brokers. It brings integrity to brand evaluation. If the guidelines of ISO 10669:2010 are applied, it becomes more difficult to inflate or reduce the apparent value of a business by using methodology or procedures that are unconventional or inconsistent with consistent practices.

There are a number of definitions for a trademark in legislation that regulates the monopolisation of signs that are used to distinguish goods or services in the course of trade. “Statutes in different countries are not consistent. Also, a brand from a financial perspective and a trademark in a legal regulatory sense are not seen by industry to be one and the same. ISO 10668:2010 provides certainty in defining a brand,” said Van Zyl.

For the purpose of brand evaluation, ISO 10668:2010 defines a brand to be “a marketing-related intangible asset including, but not limited to, names, terms signs, symbols, logos and designs or a combination of these, intended to identify goods, services, entities, or a combination of these, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits-values”.

Van Zyl said it is notable that ISO 10668:2010 does not make it compulsory for a brand to be registered as a trademark in order for it to be identifiable as an asset that may be separated from the goodwill of a business. “It is significant, as the courts in many countries, including South Africa, have indicated that a so-called “unregistered” trademark cannot be separated from the goodwill of a business and must be sold together with a business as a going concern.”

The current definition of a brand is intended to avoid technical legal issues when determining the value of a business for the purposes of a sale transaction but, for many purposes, a mark will have to be registered in South Africa for a valuation to be relevant.

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