Global BV News: Growing calls for new approach to intangibles

BVWireIssue #178-3
July 26, 2017

Brand Finance has released its 2017 Global Intangible Finance Tracker (GIFT) that analyzes intangible value at over 57,000 companies. In terms of key findings, it states that intangible value continues to rise globally—hitting $47 trillion (up from $19.8 trillion in 2001). However, as current financial reporting regulations only require disclosure of intangible assets during M&A activity, the new report states that $35 trillion worth of intangible value was left off balance sheets globally in 2016. Much of the study, then, focuses on the contrast between disclosed and undisclosed intangibles. The charge is that IFRS 3 has failed to “adequately report the current real value of both internally generated and acquired intangibles” leading to confusion due to some intangible assets appearing on balance sheets while most do not.

Coalition for Inclusive Capitalism, a not-for-profit organization supported by some of the largest companies in the world, supports the call for companies’ intangible assets—including the value of their brands, reputation, and employee skills—to be included on balance sheets for financial reporting. The coalition is seeking to establish a framework for the valuation of such assets.

In June, the coalition and EY have announced they are bringing together CEOs from over 20 global companies, representing more than $20 trillion of assets under management, to work on a proof of concept to encourage and measure long-term value creation. The project, called “The Embankment Project for Inclusive Capitalism,” will develop and test a new framework to better reflect the full value companies create through human, physical, financial, and intellectual capital deployment.

Please let us know if you have any comments about this article or enhancements you would like to see.