Starting next year, new accounting standards in India will require publicly listed companies to disclose the value of brands they acquire, according to an article in the Hindu Business Line. This is in the wake of the Kingfisher Airlines fraud investigation concerning whether the company’s brand valuation was improperly inflated to get more bank financing.
Time is right: Experts think that brand valuation needs a new set of rules, and they point to the wide variations in brand values depending on which valuation consultant is used. The risk is that a company could cherry-pick the values it wants to use that may not be in the best interests of stakeholders or lenders, as the Kingfisher case illustrates. “Most brand valuation exercises that are put out in public are unsolicited, without access to most relevant data and information from the owners of the brands,” says Christof Binder (Trademark Comparables AG) in the article. “They are simply to create publicity and consulting engagements for the firms who release them. None of these values has traction with the real world when it comes to transactions. This holds true in particular for brands in banking, telecom, airlines, and others which are never acquired for their brand names.”
Binder’s firm maintains the MARKABLES database of trademark valuation comparables. He is the author of an article, “Debunking the Myth That Business Appraisers Lowball Brand Values,” that discusses brand valuation by financial experts versus marketers. The article appears in the July 2016 issue of Business Valuation Update.