Retail – Bull’s eye on brand value

Auditors are failing to spot worthless brands the chairman of J Sainsbury has claimed.

Sir George Bull said auditors lacked sufficient knowledge to value brands properly.

‘They may be able to calculate the net present value of a future stream of revenue, but how good are they at recognising a wildly optimistic sales forecast or an over-ambitious pricing strategy?’ he asked the BCAB conference.

He said accountancy firms should start specialising in brands in the same way surveyors specialise in pubs or hotels.

‘It would certainly make life a whole lot easier for auditors if their clients used recognised firms of brand valuation experts and there was only one official method for estimating brand worth,’ he added.

Bull supported the publication this year of FRS 10 and FRS 11, which recognised that brands should be on the balance sheet alongside buildings, plants and machinery.

Brands, he said, were often a business’ finest asset but accounting practice for intangible assets looked archaic.

He added that balance sheets risked becoming irrelevant and outmoded unless they captured the worth of intangible assets which increasingly determine business success.

Bull also said shareholders and other users of accounts appreciated more information about brands, and including them on the balance sheet would encourage more effort in marketing.

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