Discuss the Difficulties Relating to the Recognition and Measurement of Intangibles Generally and of Brands in Particular.
Discuss the difficulties relating to the recognition and measurement of intangibles generally and of brands in particular.
Intangible assets are getting more and more important to companies or businesses. The reason for this is that the economy has changed from being industrial to knowledge-based. It is no longer the industrial value chain that creates value; it is innovation and constantly seeking new ways of meeting market demands. Companies can no longer differentiate themselves or create competitive advantages without intangible assets. Brands can be defined as any design to identify and distinguish one product or a group of products from other product. But brands are more than just the name or sign. In general, the companies create a unique image of the branded product or service, of its quality and attributes in the perception of the customers. Especially in the consumer product industry they are regarded as a key competitive factor which influences the consumer preferences for a product and therefore the sales of the company. Due to this important of brands for the economic development of certain businesses; the accounting treatment of brands has been a matter of debate and controversy, especially recognition and measurement topic both of intangibles generally and of brands in particular. This essay aims to discuss the difficulties relating to these issues.
First of all, in general, an item feature sometimes is difficult to identify whether it should be an asset or expenditure because of some criteria. According to IAS 38 (Melville, 2011), an intangible asset is defined as “an identifiable, non-monetary asset without physical substance”. The accounting standard also provides the main feature of this definition which is asset, without physical substance, non-monetary, and identifiable. Asset feather has two criteria; future economic benefits and control. For the latter the company must have the power to obtain the future economic benefits flowing from the
Intangible assets are getting more and more important to companies or businesses. The reason for this is that the economy has changed from being industrial to knowledge-based. It is no longer the industrial value chain that creates value; it is innovation and constantly seeking new ways of meeting market demands. Companies can no longer differentiate themselves or create competitive advantages without intangible assets. Brands can be defined as any design to identify and distinguish one product or a group of products from other product. But brands are more than just the name or sign. In general, the companies create a unique image of the branded product or service, of its quality and attributes in the perception of the customers. Especially in the consumer product industry they are regarded as a key competitive factor which influences the consumer preferences for a product and therefore the sales of the company. Due to this important of brands for the economic development of certain businesses; the accounting treatment of brands has been a matter of debate and controversy, especially recognition and measurement topic both of intangibles generally and of brands in particular. This essay aims to discuss the difficulties relating to these issues.
First of all, in general, an item feature sometimes is difficult to identify whether it should be an asset or expenditure because of some criteria. According to IAS 38 (Melville, 2011), an intangible asset is defined as “an identifiable, non-monetary asset without physical substance”. The accounting standard also provides the main feature of this definition which is asset, without physical substance, non-monetary, and identifiable. Asset feather has two criteria; future economic benefits and control. For the latter the company must have the power to obtain the future economic benefits flowing from the
Bibliography: Melville, A. (2011). International Financial Reporting. Pearson Education Limited. Walton, P., and Aerts W. (2009). Global Financial Accounting and Reporting: Principles and Analysis. HE Publisher.