Tuning up to intangible audit.

The Department for Culture, Media and Sport has recommended the ICAEW undertakes a review to help establish more appropriate rules to deal with the valuation and auditing of music copyrights.

The recommendation, to look at the balance sheet treatment of intangible assets like copyright, was made in a report produced by Kingston University which said variations in approach could make material differences in the way a business is valued.

The report, The Funding Dilemma for Britain’s Music Businesses, examines the problems faced by small companies in the music industry accessing finance.

Nick Wilson, principal researcher and co-author of the report, said the way intangible assets were recorded on the balance sheet made a difference in terms of valuation of the business.

‘Currently a manufacturing view is taken when valuing intangible assets, which is not appropriate. A different treatment is needed,’ he added.

In addition, the report said government support for SMEs has largely been designed with the manufacturing business in mind.

According to Wilson, the government was set to undertake the review itself, but had suggested that that the ICAEW conduct it instead. In essence, the review will look at the way music ‘catalogues’ are valued and will essentially be a copyrighting issue.

The Kingston report, which included interviews with members of over 300 music businesses, sought to identify the finance options that are available to SMEs, the barriers to accessing these options and the ways in which both industry and government might best overcome these barriers.

Other recommendations in the report call for an improved ‘level of understanding’ between the music industry and finance providers, better marketing of regional financial initiatives and new financial instruments including credit and loan facilities.

It also said the government and the industry should ensure that small businesses had easier access to investors and corporate venture funding.

The report also calculated that the value of the UK music industry to the national economy is #3.2bn and that the industry earns #1.3bn through exports.

When contacted the ICAEW was unable to comment.

Related reading