Valuation of a brand initially originated from two main areas: the first area was the financial treatment of the brand and the second was a marketing measurement of brand equity. Below are the techniques that can be used to value a brand. The first approach category is a cost based which puts into consideration the costs related with the creation of a brand or change the brand. This includes the development and research of the brand concept. The second category is a market approach that evaluates a brand on the basis of the price for which the brand can be sold from a highest bidder. It is used when one is selling the brand.
Income based method is another category used to value a brand based on the amount of income that the brand generates. Formulary approach is also called inter brand approach which makes adjustments on different factors. The fifth is the special situation approach.The assumptions of these methods are time value of money and sufficient supply of assets to the brand. As a business analyst, I would consider the company’s assets and liabilities including goodwill to value the brand. The question I would raise is how they depreciate the assets.
As a company's CFO, I would look at the company’s balance sheet items and evaluate if the value of the asset market price has reduced. The second item I would observe is if the rate of interest has increased. Also, the ratio of book value to market capitalization of the long term assets should have reduced significantly. Physical damage of the assets in the year is also another parameter used and lastly poor economic performance of the assets. The methods used by valuers for any asset impairment of an asset are reducing balance method that impairs an asset that reduces the current value of an asset with the impairment rate. The other method used is called straight line method which impairs an asset with the economic life of the asset. The question I would raise about impairment is how the CFO came up with the rate of impairment value.
Kahn, B. E. (2013). Global Brand Power: Leveraging Branding for Long-Term Growth. Chicago: Wharton Digital Press.
Morley, M. (2009). The Global Corporate Brand Book. New York: Palgrave Macmillan.