Do you recognize Coca Cola’s logo? Can you think of the unique tune that plays in Nokia commercials? Such nonmaterial items that belong to a particular company and hold a significant inherent value to the company are called intangible assets of the company.
By nature, most of the intangible assets are unique. Intangible assets often bestow on companies greater profit margins, capture larger market share, and facilitate access to enter new markets. For instance, Colgate-Palmolive Company owns the brand name Colgate, which is a very valuable intangible asset in the sector of the oral care products. Colgate products have higher profit margins than other nonbranded equivalent products. The products also allow capturing higher market shares and ease the entry to new markets or new products.
Intangible assets are nonmaterial and essentially invisible. Therefore, there is a possibility that the management of a company may not be able to identify intangible assets properly. Moreover, the management may not have identified the importance of intangible assets to the company or organization. Further, most intangible assets are not bought and sold frequently enough or in an open market, which makes it difficult to compare their value.
Consider, for instance, a high-end German automotive company with three lines of business and a dozen assembly plants throughout Germany. Valuing the worth of the manufacturing plants for accounting purposes is easy. Management will need to simply collect and tally the invoices of the construction of the plants and do some calculations. However, the simple essence of the company’s name may contribute significantly to the company’s earnings.
How can you measure the value of your company’s name? How can you measure the value of your company’s workforce? What is the value of the patents your company holds?
The Accenture Academy course Valuing Brands and Other Intangible Assets covers common practices that you can use to value intangible assets, such as a brand name, a workforce, or a patent. This course examines how to measure the value of intangible assets and recognize the importance and limitations of the valuation models through several examples.