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Hi,
I was wondering what could internally generated brand could be and the sense behind why it is not recognized as an intangible asset.
please explain with an example.
thanks.Think of a company – any company – with one or more products that you associate with a name – Coca Cola – Nestle – Vodafone – Rolls Royce – Gillette – Unilever … the name has a value, but IAS 38 says that if it is internally generated, it cannot be recognised. Because, you can’t differentiate whether money spent is on the intangible that is the brand or on the company’s internally generally goodwill (which also can’t be recognised).
So, rather like goodwill, it can only be recognised when there is a purchase transaction that makes it possible to assign a cost to it (remember, you can’t recognise something in the absence of a reliable measurement of its cost).
Coca Cola as a company has lots of brands – including Fanta, Sprite and Schweppes. Fanta and Sprite were created by Coca Cola – so cannot be recognised. But Schweppes was bought from Schweppes (also Cadbury-Schweppes) in many territories and so would be recognised.
Got it.
However, at the point of takeover what is the metrics used to assign value to the goodwill and brands? especially in the case of brand that has global reach therefore susceptible to many changes in regulation with respect to license.
thanks, Kim.The acquirer would pay an expert to value the brand (and any other intangible assets) https://www.intangiblebusiness.com/financial/ifrs-3-implementation
You don’t have to worry about this for the AAA exam – if relevant, you would be told the amount.
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