What Significance Does Brand Equity Have For Companies Part One
The relevance of brands is undisputed these days. Strong brands bind customers, realize price premiums, and simplify the launch of a new product.
They are the relationship anchor to the consumer. Accordingly, high double-digit million amounts are invested in building brands - followed by significant expenses for continuous brand management.
How Brand Valuation Affect The Company
Despite these generally recognized relationships, the topic of brand value and brand valuation in the United States is not yet firmly anchored in the consciousness of top management.
This is paradoxical as international accounting regulations have already taken the relevance of brand values into account accordingly.
If, for example, US GAAP is used for accounting, the goodwill of acquired companies must be broken down into individual assets in the consolidated financial statements, and brand values must therefore be shown.
Global players such as Allianz, which have to account for the Dresdner Bank brand value, are affected by these regulations. In addition, these brand values capitalized in goodwill based on the Impairment Only Approach (IOA) are no longer subject to scheduled depreciation but are checked annually for impairment.
Investments in brands (and thus brand values) can have a positive impact on the balance sheet. Similar regulations can already be found in the International Accounting Standards (IAS) and the accounting guidelines of Great Britain and France.