A few years ago, anoraks may remember, accountants and marketers became locked in a debate about whether - and how - to put brands on the balance sheet.

A few years ago, anoraks may remember, accountants and marketers

became locked in a debate about whether - and how - to put brands on the

balance sheet.

Naturally, before you could do this, the industry had to arrive at a

mutually agreed way of valuing what are essentially intangibles with a

potentially infinite shelf-life. The arguments see-sawed around before

being consigned to an accounting standards committee or some such


Now, according to the aptly named Raymond Perrier of Interbrand (which

has obviously sniffed out a good thing), we have a result in the shape

of a new financial reporting standard, FRS10.

Since hardcore technical stuff gives financial illiterates like me a

nosebleed, I won’t pretend to be able to explain the finer details of

FRS10. Suffice to say that if you put a brand on a balance sheet, you

have to measure it every year to see whether its value has gone up or


Some brands lose value over time in a way that is related to their sales

performance, though not exclusively (eg Campari or Babycham).

But by its very nature, the science of brand valuation goes beyond sales

volume or market share and must include such ’soft’ factors as trust and

consumer perceptions of status, glamour and so on.

Now it would be simplistic to conclude that the mere act of valuing

brands in order to put them on the balance sheet means brand owners will

concentrate on value-enhancing advertising at the expense of promotional

work that shifts the product. Life just isn’t like that.

But the change should mean finance directors and senior management will

have to take the concept of brands more seriously. As the guardians of

the balance sheet, finance directors will be negligent if they do

anything else.

Various management studies have shown that companies’ internal lack of

understanding of their brands is the biggest threat to their long-term

prosperity. So in the long term, this cultural shift could be the most

positive benefit to come from what is a mere technical change in

accounting rules.

It is often said that Colman’s earns two-thirds of its profits from the

mustard people leave on the side of their plates. The same must apply to

soap powder makers such as Lever Brothers. Most people, I suspect, have

no idea what the right amount is and stick a bit more in for luck

(unless you bought the clothes-rotting Persil Power, in which case the

best thing to do was to use a bit less than you thought right).

As a consumer, one can only applaud Lever’s decision to launch the

Persil soap tablet, each of which (I hope) contains just the right

amount for one wash. Hooray. No more waste, no more froth bubbling out

of the machine.

But it’s a bit of a marketing conundrum. On the one hand, Lever has

given Persil a genuine point of difference, if not technically then in

terms of consumer value. On the other, how do you sell something that

threatens to cut into volume and, presumably, profits? Given its history

with Persil Power, it’s an acute dilemma for Lever.