Separating the brand asset from the goodwill asset
| Pages | 291-304 |
| Published date | 01 August 1998 |
| Date | 01 August 1998 |
| DOI | https://doi.org/10.1108/10610429810229834 |
| Author | Tony Tollington |
| Subject Matter | Marketing |
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 7 NO. 4 1998, pp. 291-304 © MCB UNIVERSITY PRESS, 1061-0421 291
Introduction
The people who manage marketing should be in the frontline of bringing about the
changes in our companies….They should encourage the accountants to devise
appropriate, new ways of dealing with the different kinds of intangible assets that
are becoming paramount in the governance of companies. They should never allow
the retrograde attitude of accountants to become a defence for inaction or for that
untidy steamy heap called “goodwill” to be an acceptable alternative.
The above quotation is taken from Brands on the Balance Sheet by van
Mesdag (1993). Partly in response to van Mesdag’s (1993) opening
comments Tollington (1998) encourages the accounting profession to report
the widespread recognition of intangible brand assets using a new brand
asset definition. This definition proposes “separability” rather than a
“transaction or event” as the basis for the recognition of brand assets on the
balance sheet, separately from goodwill. Whether such an approach will find
favor with the accounting profession is a matter for future debate. It is the
final sentence, above, which is pertinent to the focus of this paper,
specifically, the reference to goodwill as an “acceptable alternative”, in this
respect, to the recognition of brand assets on the balance sheet.
The debate within the marketing profession, in respect of brand assets (see
de Chernatony, 1993; de Chernatony and McWilliam, 1989; Oldroyd, 1994;
Wood, 1995), has also included related headings such as brand valuation
(see Blackett, 1991; Mullen and Mainz, 1989; Saunders, 1990) and brand
equity (see Aaker, 1992; Biel, 1991; Blackston, 1992; Crimmins, 1992;
Drobis, 1993; Egan and Guilding, 1994; Keller, 1993; Rubinson, 1993). For
example, Aaker (1991) defines brand equity as a set of “…assets and
liabilities linked to a brand, its name and symbol, that add to or subtract
from the value provided by a product or service to a firm and/or to that
firm’s customers’ (p. 15) and he identifies five categories of intangible
“…brand-equity assets (that) require investment to create, and (that) will
dissipate over time unless maintained” (p. 18, brackets mine). The
marketing focus, therefore, has been on the creation of customer value or
added value (see de Chernatony and McDonald, 1992; Wood, 1996) rather
than specifically on the inclusion of brand assets on the balance sheet,
which Murphy (1990) regards as something of a technical accounting side
show. Though a matter of conjecture, there appears to be an attitude among
some marketers that as long as they control brand-equity assets such as
Aaker’s brand loyalty, brand name awareness, perceived quality and so on
(p. 17) what does it matter whether accountants recognise them as assets or
not? However, the UK Chartered Institute of Marketing believes it does
matter:
It is not the acceptance of the existence of brand equity which has been at the heart
of the debate; it is whether accounting practices can adapt to a changing business
environment in which “worth” is often typified by a set of intangible assets. This is
an issue which our accounting colleagues show a persistent lack of commitment to
resolve. And resolve it should be. (CIM, 1993)
Separating the brand asset from
the goodwill asset
Tony Tollington
Senior Lecturer, Middlesex University Business School, London, UK
An executive summary
for managers and
executives can be found
at the end of this article
What does it matter
whether accountants
recognise assets or not?
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