• Study reveals that global intangible value has exceeded $50 trillion for first time
  • Amazon tops intangibles, but falls out of top 100 in only disclosed value
  • Over 75% of the world’s intangible assets are missing from balance sheets

Brand Finance has released its latest Global Intangible Finance Tracker (GIFT) report, with Amazon.com overtaking Microsoft as the company boasting the highest level of intangible value. Technology companies dominate the top 10, but the picture is different when only disclosed intangible value is considered – prompting a call for a new approach to financial reporting.

In terms of headline findings, the report found that:

  • Global intangible value reached $57.3 trillion at the beginning of the current financial year, busting through the $50 trillion barrier for the first time
  • Intangible value now constitutes 52% of the overall enterprise value of all publicly traded companies worldwide (which now amounts to $109.3 trillion)
  • 76% of the world’s intangible value – $43.7 trillion – remains unaccounted for on balance sheets (up 25% year on year).
  • Belgium boasted the highest percentage of disclosed intangibles versus total enterprise value (39.8%), in large part due to Anheuser-Busch InBev’s balance sheet – the company having the second-highest value of disclosed intangibles worldwide, totalling $187 billion.

Turning to the companies possessing the greatest total intangible value (disclosed and undisclosed), Amazon.com topped the list – leapfrogging Apple and Microsoft. In this regard, the pattern mirrors the previously published Most Valuable Brands list, in which the tech giant overtook Apple and Google to secure top spot.

The top 20 companies by intangible value are as follows:

Rank (and 2017 position)

Company

Total Intangible Value (USD $bn)

Total Intangible Value/Enterprise Value (%)

1 (3)

Amazon.com Inc

827

96%

2 (2)

Microsoft Corp

686

95%

3 (1)

Apple Inc

648

85%

4 (4)

Alphabet Inc

576

80%

5 (12)

Alibaba Group Holding

478

93%

6 (6)

Facebook Inc

470

89%

7 (11)

Tencent Holdings Ltd

443

91%

8 (9)

Johnson & Johnson

351

101%

9 (5)

AT&T Inc

311

88%

10 (7)

Anheuser-Busch InBev

308

101%

11 (18)

Visa Inc

290

102%

12 (8)

Verizon Communications Inc

277

87%

13 (25)

Unitedhealth Group Inc

259

100%

14 (13)

Pfizer Inc

246

102%

15 (16)

Berkshire Hathaway Inc

243

93%

16 (27)

Home Depot Inc

230

91%

17 (17)

Nestle SA-REG

219

88%

18 (41)

Intel Corp

213

85%

19 (44)

Mastercard Inc

209

101%

20 (14)

The Procter & Gamble Co

207

97%

In some respects, that many of the world’s most valuable brands possess the greatest intangible value is not a surprise. After all, the sectors possessing high levels of patents, technology and marketing intellectual property are invariably those with a larger proportion of intangible assets within their overall enterprise value – with marketing IP including trademarks, service marks, trade dress and domain names. For instance, the report notes that the cosmetics & personal care sector, “which is dependent to a large degree on brand recognition and the need to continually roll-out new marketing and advertising”, has the highest percentage of its enterprise value attributable to intangibles (90%). As a result, the leading companies within the sector have extremely high levels of intangibles, notably Procter & Gamble (97%), Unilever (96%) and L’Oréal (88%).

The top 10 industry sectors in terms of total intangible value are:

  • Cosmetics & personal care (90%)
  • Aerospace & defence (90%)
  • Internet & software (87%)
  • Pharma (87)
  • Healthcare (85%)
  • Media (84%
  • Drinks (81%)
  • Commercial services (76%)
  • Food (73%)

As noted above, Anheuser-Busch InBev’s boasted the second-highest value of disclosed intangibles worldwide, totalling $187 billion. However, in terms of overall intangible value (declared and undeclared) it drops to tenth place. This is the case in a number of instances. For instance, AT&T tops the list of disclosed intangibles but is in ninth place for overall intangible value. Elsewhere, Amazon and Apple, while sitting on significant intangible value, don’t make the top 100 ranking of companies when only disclosed value is counted. In fact, the list of top ten companies by disclosed intangible value (AT&T; Anheuser-Busch Inbev; British American Tobacco; Verizon Communications; Berkshire Hathaway; Comcast Corp-Class; Charter Communications; Pfizer; Allergan; The Kraft Heinz Co) is notable for the absence of the tech giants that dominate the overall tangible value top ten.

This contrast is striking. Ultimately, though, 76% of the world’s intangible value is absent from balance sheets due to current accounting practices, as current financial reporting rules allow intangible asset disclosure only during M&A activity. As David Haigh, CEO of Brand Finance, notes, this leads to a situation where, for example, the value residing in Smirnoff appears in Diageo’s balance sheet, but Baileys’ does not. As a result, he is calling for a new approach to financial reporting, specifically one whereby board members should be required to disclose – on an annual basis – their opinion of the fair value of the underlying values of all key intangible assets under their control. He argues: “If we could achieve a more meaningful reporting approach we believe that it would lead to better informed management, higher investment in innovation and intangible asset value creation, stronger balance sheets, better defence against asset strippers and generally serve the needs of all stakeholders. In our opinion it is time for CEOs, CFOs and CMOs to start a long overdue reporting revolution.”

Such an exercise would also prove beneficial for the teams tasked with calculating licensing premiums. Importantly, it would also prove a useful tool for trademark teams in their efforts to highlight the true value of the brands that their work helps build, protect and exploit. If senior management was required to place a value on their brands, those efforts for recognition (and resourcing) would become a lot easier.