The global intangible value of top brands has surpassed $50 trillion (£38 trillion) for the first time in history, but three quarters of this remains unaccounted for on balance sheets, according to research by Brand Finance
Its Global Intangible Finance Tracker (GIFT) report estimates global intangible value for leading brands, headed by Amazon, Microsoft and Apple, reached $57.3 trillion at the beginning of the current financial year.
This constitutes 52% of the overall enterprise value of all publicly traded companies worldwide, which it calculates now amounts to $109.3 trillion, exceeding the $100 trillion mark also for the first time.
However, the analysis also suggests that 76% of the world’s intangible value - $43.7 trillion - remains unaccounted for on balance sheets. At $35 trillion last year, undisclosed intangible value has grown by 25% year on year – five times faster than the value of disclosed intangible assets (up 5%) - and outpacing by far the overall global enterprise value growth (up 18%).
The past year has also seen a decline in the granularity of intangible asset reporting as the gap between disclosed intangible assets - accounted for in detail on balance sheets - and goodwill has widened dramatically.
GIFT analysis indicates companies now list $2.3 trillion more goodwill than disclosed intangible assets, compared to $1.8 trillion last year.
David Haigh, CEO of Brand Finance, said that insufficient reporting of intangible assets leads to problems for analysts, investors, boards, and stakeholders, as assessments may not be accurate, leading to share price volatility.
Haig said: ‘A commitment to undertake an annual revaluation of all company assets, including tangible assets, acquired intangibles, and intangibles generated internally, would be a boon for boards, accountants, investors, and analysts.
‘Newly-gained transparency and clarity would enable boards to make more effective use of their assets, accountants to have a more detailed picture of asset values, and investors and analysts to more accurately price shares.’
He says the problem is illustrated by the disparity between the list of the world’s top 100 most intangible companies and an equivalent list ranked by disclosed - as opposed to total - intangible value.
Amazon, with intangibles worth $827bn, has taken over as the most intangible company in the world, displacing last year’s leader Apple ($648bn). However both fail to make the list of top 100 companies by disclosed intangible value. Their intangible value remains undisclosed at 98% and 99% respectively.
Overall, the report suggests internet and software companies report less than 10% of intangible value, despite topping the rankings of asset-rich companies.
Global Intangible Finance Tracker is here
Report by Pat Sweet