ISO 10668 - Requirements for monetary brand valuation
"ISO 10668 gives brand valuation analysis the institutional credibility which it previously lacked. It professionalises brand management."
In 2007 the International Organization for Standardization ('ISO'), set up a task force to draft an International Standard on monetary brand valuation
The ISO technical committee consisted of delegates from 14 countries and four countries with observer status. International organizations, governmental and non-governmental, in liaison with ISO, also took part in the work.
The project was initiated by Germany (Semion was a member of the committee), which also chaired the committee, with the German Institute for Standardization (DIN) holding the position of secretariat.
Concluding its work in December 2009, the committee released ISO 10668 in Autumn 2011.
ISO 10668 is a 'meta standard' which succinctly specifies the principles to be followed and the types of work to be conducted in any brand valuation. It is a summary of existing best practice and intentionally avoids detailed methodological work steps and requirements.
ISO 10668 is in line with the existing standards like IFRS and OECD but extends them to encompass the legal and behavioral aspects that are so crucial to the practice. It is this achievement that makes the new standard so valuable for practitioners and users of the valuation service alike. ISO 10668 is the only guideline for brand valuation that is relevant to all brand valuation purposes, such as
Under ISO 10668 the brand valuer must declare the purpose of the valuation as this affects the premise or basis of value, the valuation assumptions used and the ultimate valuation opinion, all of which need to be transparent to a user of the final brand valuation report.
Requirements of an ISO compliant brand valuation
- Accounting and financial reporting
- Insolvency and liquidation
- Tax planning and compliance
- Litigation support and dispute resolution
- Corporate finance and fundraising
- Licensing and joint venture negotiation
- Internal management information and reporting
- Strategic planning and brand management
- Brand and marketing budget determination
- Brand portfolio review
- Brand architecture analysis
- Brand extension planning
When conducting a brand valuation under ISO 10668, the brand valuer must conduct 3 types of analysis before passing an opinion on the brand's value.
These are Legal, Behavioural and Financial analysis. All 3 types of analysis are required to arrive at a thorough brand valuation opinion. This requirement applies to valuations of existing brands, new brands and brand extensions.
ISO 10668 Module 1: Legal analysis
The first requirement is to define what is meant by 'brand' and which intangible assets should be included in the brand valuation opinion. ISO 10668 begins by defining Trademarks in conventional terms but it also refers to other Intangible Assets ('IA') including Intellectual Property Rights ('IPR') which are often included in broader definitions of 'brand'.
International Financial Reporting Standard 3 ('IFRS3'), specifies how all acquired assets should be defined, valued and accounted for post-acquisition. It refers to 5 specific IA types which can be separated from residual Goodwill arising on acquisition.
ISO 10668 Module 2: Behavioural analysis
The second requirement when valuing brands under ISO 10668 is a thorough behavioural analysis. The brand valuer must understand and form an opinion on likely stakeholder behaviour in each of the geographical, product and customer segments in which the subject brand operates.
ISO 10668 Module 3: Financial analysis
The third requirement when valuing brands under ISO 10668 is a thorough financial analysis.
ISO 10668 specifies three alternative brand valuation approaches - the Market, Cost and Income Approaches. The purpose of the brand valuation, the premise or basis of value and the characteristics of the subject brand dictate which primary approach should be used to calculate its value.
ISO 10668: CONCLUSION
ISO 10668 gives brand valuation analysis the institutional credibility which it previously lacked. It professionalises brand management. As evidence of this SAM Group which produces the Dow Jones Sustainability Index, intends to upweight businesses in the DJSI if they adopt ISO 10668 principles. This is based on the view that businesses which manage their brands systematically are likely to be more sustainable long term.
semion's own valuation method and practice is fully in line with ISO 10668.
Link zur ISO - International Organization for Standardization