290. Expert Interview: Why Don't CFOs Get the Power of Branding?

Marketers are caught in a frustrating Catch 22 situation. They know the tremendous value of branding, but when it’s time to submit a budget to help them build both corporate reputation and brands, they’re held back by accounting practices that simply don’t take this into consideration. “They can’t do it because generally accepted accounting principles do not allow them to even consider it. And it’s a very frustrating thing for all marketers, because they can’t go in there and talk to their CEO about the value they’re creating because the CEO and CFO see no value being created, simply because it’s not reportable.”

The concepts and the methods of valuation have dramatically changed since 1975, but generally accepted accounting procedures (GAAP) have not kept up. “If you go back to 1975, 17 percent of a company’s value related to intangible assets, and only a very small portion of that was something that could be accountable. Brands were an even smaller portion of that, at only 17 percent. But that’s all changed.

Now, 84 percent of a company’s value relates to the intangibles—including customer lists, R&D in the pipeline, and proprietary techniques—and also the corporate brand and the product brands underneath these intangibles. We know from our empirical studies that the value of these intangible assets has grown tremendously. To close this glaring gap in the generally accepted accounting procedures, Jim has been working closely with the Marketing Accountability Standards Board (“Masby”), building a solid, data-based case for change.