Brand Finance
Encyclopedia
Brand Finance is an independent intangible asset
valuation consultancy. It advises strongly branded organisations, or those with valuable intangible assets, on how to maximise their value through effective management of their brand
and other intangible assets. Brand Finance has been certified with ISO 10668
:2010.
with Price Waterhouse in London. Prior to setting up Brand Finance, he was the Director of Interbrand
’s global brand valuation practice in London.
Brand Finance opened its first international offices in the USA, Singapore and Australia in 2000 and now has a global network of offices and partners in 20 countries worldwide.
specifies three alternative brand valuation approaches - the Market, Cost and Income Approaches. The purpose of the brand valuation, the premise or basis of value and the characteristics of the subject brand dictate which primary approach should be used to calculate its value.
For it's annual league tables of the most valuable brands, Brand Finance employs a Royalty Relief methodology
when calculating the value of a brand. The Royalty Relief approach is based on the assumption that if a company did not own the trademarks that it exploits, it would need to license them from a third party brand owner instead. Ownership therefore ‘relieves’ the company from paying a license fee (the royalty) for the use of the third party trademarks.
The Royalty Relief method involves estimating likely future sales, applying an appropriate royalty rate to them and then discounting estimated future, post-tax royalties
, to arrive at a Net Present Value
(NPV). This is held to represent the brand value.
, annual reports, client-commissioned research and Brand Finance internal research.
magazine.
Intangible asset
Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset...
valuation consultancy. It advises strongly branded organisations, or those with valuable intangible assets, on how to maximise their value through effective management of their brand
Brand
The American Marketing Association defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers."...
and other intangible assets. Brand Finance has been certified with ISO 10668
ISO 10668
In 2007 the International Organization for Standardization , set up a task force to draft an International Standard on monetary brand valuation. After 3 years the ISO 10668 – Monetary Brand Valuation – was released in Autumn 2010...
:2010.
History
Brand Finance was founded in 1996 by David Haigh, who qualified as a Chartered AccountantChartered Accountant
Chartered Accountants were the first accountants to form a professional body, initially established in Britain in 1854. The Edinburgh Society of Accountants , the Glasgow Institute of Accountants and Actuaries and the Aberdeen Society of Accountants were each granted a royal charter almost from...
with Price Waterhouse in London. Prior to setting up Brand Finance, he was the Director of Interbrand
Interbrand
Interbrand, a division of Omnicom, is a global branding consultancy, specializing in vast brand services, including brand analytics, brand strategy, brand valuation, corporate design, digital brand management, and naming...
’s global brand valuation practice in London.
Brand Finance opened its first international offices in the USA, Singapore and Australia in 2000 and now has a global network of offices and partners in 20 countries worldwide.
Methodology
ISO 10668ISO 10668
In 2007 the International Organization for Standardization , set up a task force to draft an International Standard on monetary brand valuation. After 3 years the ISO 10668 – Monetary Brand Valuation – was released in Autumn 2010...
specifies three alternative brand valuation approaches - the Market, Cost and Income Approaches. The purpose of the brand valuation, the premise or basis of value and the characteristics of the subject brand dictate which primary approach should be used to calculate its value.
For it's annual league tables of the most valuable brands, Brand Finance employs a Royalty Relief methodology
Methodology
Methodology is generally a guideline for solving a problem, with specificcomponents such as phases, tasks, methods, techniques and tools . It can be defined also as follows:...
when calculating the value of a brand. The Royalty Relief approach is based on the assumption that if a company did not own the trademarks that it exploits, it would need to license them from a third party brand owner instead. Ownership therefore ‘relieves’ the company from paying a license fee (the royalty) for the use of the third party trademarks.
The Royalty Relief method involves estimating likely future sales, applying an appropriate royalty rate to them and then discounting estimated future, post-tax royalties
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
, to arrive at a Net Present Value
Net present value
In finance, the net present value or net present worth of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values of the individual cash flows of the same entity...
(NPV). This is held to represent the brand value.
Brand Ratings
In determining the appropriate royalty rate, Brand Finance establishes a range of comparable arm’s length royalty rates, and determines the point within the range that the brand under review falls by reference to a brand rating. The brand rating is calculated using Brand Finance's ßrandßeta® analysis which benchmarks the strength, risk and potential of a brand, relative to its competitors, on a scale ranging from AAA to D. It is conceptually similar to a credit rating. The data used to calculate the ratings comes from various sources including BloombergBloomberg L.P.
Bloomberg L.P. is an American privately held financial software, media, and data company. Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.9 billion. Bloomberg L.P...
, annual reports, client-commissioned research and Brand Finance internal research.
Brand Finance League Tables
Each year Brand Finance produces a number of Brand League tables, segmented by region or sector. They launch many of these in conjunction with industry leading publications. The BrandFinance® Banking 500 is published in The BankerThe Banker
The Banker is an English-language monthly international financial affairs publication owned by The Financial Times Ltd. and edited in London...
magazine.