For all of the time, money and effort companies spend building brands, many corporate leaders admit they have little way of tracking a brand’s value on a balance sheet.
According to a survey of nearly 300 CEOs by the American Institute of CPAs and the Chartered Institute of Management Accountants, 75% agreed they needed to put a greater emphasis in demonstrating the non-financial value (which includes brand valuation, as well as other areas such as human capital that don’t regularly show up on a balance sheet). Only 51% of those surveyed said they thought their firms measure the non-financial value well or very well.
“Brands really are generally a very strong non-financial asset of organizations,” Arleen Thomas, senior vice president of management accounting at AICPA, tells Marketing Daily. “Some brands have value on the financial statements because they were purchased. But those that grew up with a company [aren’t necessarily recorded]. It’s really important for an organization to understand the [financial] impacts on those brands and how they change.”
The biggest obstacle for companies measuring this value is an ongoing focus and on short-term financials. According to the survey, 35% of CEOs noted many tools are skewed to measuring financial value, while 34% cited pressure from financial markets and 33% said investor focus on profitability were things preventing them from measuring non-financial assets such as brand value.
“It’s easy to be focused on the short term,” Thomas says. “But really when it comes to understanding non-financial value, you’ve got to put that pressure aside and understand the things that drive long-term success.”