ISO 10668:2010 can assist to determine the value of brands
The intangible assets of a business, including its brands, are often said to be their most valuable assets. However, as brands are intangible assets, convincing others of the actual monetary value of a brand depends on acceptance and credibility of the method of valuation.
In October last year, in a significant development for brand valuation methodology, the International Standards Organisation (ISO) published an international standard for monetary brand valuation. ISO 10668:2010 "Brand valuation - requirements for monetary brand valuation" specifies uniform requirements and procedures for monetary brand value measurement.
"Unsurprisingly, the ISO standard rubber-stamps the three main methods of brand valuation that have commonly been used by legal practitioners and financial services professionals to evaluate brands. ISO 10668:2010 states that brands may be valued by applying the income, market or cost approaches," says Christophe van Zyl, senior associate at IP law firm Adams & Adams. "It also details how each approach is to be implemented."
According to van Zyl, the ISO guideline is significant for a number of reasons. Among these is uniformity while practicality also constitutes an important part of the evaluation. It is now possible to create an acceptable standard of valuation for both the seller and the purchaser by stating that the value of the brands shall be determined according to a particular method and in accordance with specific guidelines in ISO 10668:2010.
ISO is clear in defining a brand
ISO 10669:2010 should be embraced by authorities, businesses, auditors and even business brokers. It brings integrity to brand evaluation. If the guidelines of ISO 10669:2010 are applied, it becomes more difficult to inflate or reduce the apparent value of a business by using methodology or procedures that are unconventional or inconsistent with consistent practices. ISO 10669:2010 could in many ways be seen as an acceptable boni mores for brand value auditing.
Van Zyl says there are a number of definitions for a 'trademark' in legislation that regulates the monopolisation of signs that are used to distinguish goods or services in the course of trade. "Statutes in different countries are not consistent. Also, a brand from a financial perspective and a trademark in a legal regulatory sense are not seen by industry to be one and the same. ISO 10668:2010 provides certainty in defining a brand."
Van Zyl says it is notable that ISO 10668:2010 does not make it compulsory for a brand to be registered as a trademark in order for it to be identifiable as an asset that may be separated from the goodwill of a business. "It is significant as the courts in many countries, including South Africa, have indicated that a so called 'unregistered' trademark cannot be separated from the goodwill of a business and must be sold together with a business as a going concern."
At this time ISO 10669:2010 has not been recognised by the South African Bureau of Standards. "However, as ISO 10669:2010 is applicable in various countries that are members of the International Standards Organisation, ISO 10668:2010 is a standard that is practical and ought to be considered as a guideline for brand evaluation in South Africa," says van Zyl.