Brands by Value

11 July, 2012

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l Discount future royalty stream (explicit forecast and perpetuity periods) to a net present value – ie. the brand value.

Royalty relief approach

Brand Finance uses the royalty relief methodology, recommended by the International Valuation Standards Authority (IVSC) and recognised by the ISO 10668 Brand Valuation Standard. It determines the value of the brand in relation to the royalty rate that would be payable for its use were it owned by a third party. The royalty rate is applied to future revenue to determine an earnings stream that is attributable to the brand. The brand earnings stream is then discounted back to a net present value.

The royalty relief approach is used for three reasons: it is favoured by tax authorities and the courts because it calculates brand values by reference to documented third-party transactions; it can be done based on publicly available financial information; and it is compliant with the requirement under the IVSC to determine Fair Market Value of brands.

Brand ratings

These are calculated using Brand Finance’s ßrandßeta® analysis, which benchmarks the strength, risk and future potential of a brand relative to its competitors on a scale ranging from AAA to D. It is conceptually similar to a credit rating.

Valuation date

The data used to calculate the ratings comes from various sources including Bloomberg, annual reports and Brand Finance research.





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