2013年7月16日 星期二

Seeing value in the intangible

While they still have a long way to go, Singapore companies are doing much better at accounting for their intangible assets, reports VINCENT WEETHE beauty of brands is that much of their value is intangible.self storage This however also poses a problem for companies as it makes it difficult for them to assess value and the appropriate amount of resources to spend on them.This is a problem that Brand Finance has been been trying to address. It has been tracking the role of intangible assets since 2001 as part of its annual Global Intangible Finance Tracker (Gift) study, and found that intangible assets play a significant part in enterprise value generation.The Gift study tracks the performance of intangible assets on a global level and is the most extensive study on intangible assets, covering 127 national stock markets, more than 56,000 companies, representing 99 per cent of total global market capitalisation, and with analysis going back over a 12-year period from the end of December 2012.Currently, half of global market value is vested in intangible assets but management still lags behind in recognising the importance of intangible assets. Some countries such as Singapore are particularly far behind in this regard.For example, Singapore is ranked 30th in the Brand Finance 2013 Gift Study, well behind Malaysia that stands at an impressive 18th and Thailand and Philippines which are ranked at 11th and 13th respectively.Brand Finance has thus been researching intangible assets with an emphasis on helping corporations understand brand strength and value, aiming to examine the performance of Singapore's intangible assets and brands.For the intangible asset study, the total enterprise value of corporate Singapore is divided into four components of undisclosed value, disclosed goodwill, disclosed intangible assets and tangible net assets.For Singapore, out of a total of US$464 billion in enterprise value, tangible net assets accounted for 58 per cent or US$269 billion, while disclosed intangible assets excluding goodwill comprised just 5 per cent or US$23 billion. Disclosed value made up another 5 per cent while the remaining 32 per cent or US$149 billion comprised of undisclosed value.In last year's report, intangible assets looked upbeat when the stock markets worldwide showed signs of recovery. They represented over 49 per cent of enterprise value as at the end of 2011. This year's results show that by the end of 2012, the intangibles increased by US$5.3 trillion during 2012, comprising 50 per cent of the total enterprise value, and significantly above the 2008 financial crisis level. The main increase of US$3 trillion was in the value of undisclosed intangible assets including brands.The moderate increase in the undisclosed value illustrates that the brands are still on a recovery path and yet to reach the high intangible against tangible ratio of over 65 per cent seen during the pre-global crisis years of 2004 to 2007.This further illustrates the lack of understanding of intangible assets among companies, big and small, shown by their overvaluing of intangibles in boom times and under-valuing them in economic downturns.The fact that most of the intangible value is not disclosed on company balance sheets further shows how poorly understood intangibles still are by investors and management alike - and how out-of-date current accounting practices are. "Such ignorance leads to poor decision-making companies and systematic mis-pricing of stock by investors," the report said.Enterprise valueAccording to the Brand Finance Top 100 Singapore Brands Report 2013: "Intangible assets have traditionally tipped the scales over tangible assets to create value for companies and the global economy." For Singapore, intangible assets increased by US$50 billion in 2012, compared to a US$126 billion decrease in 2011.While it still has a long way to go, by all accounts Singapore is doing much better at this metric, despite the traditional resistance of many companies to recognise the importance of intangibles in brand value. As at the end of 2012, while the total enterprise value increased by US$55 billion, the bulk of the increase in value was due to the increase in intangibles value (US$50 billion). As at end-2011, the total intangible value of Singapore companies stood at a high US$144 billion, making up 35 per cent of the enterprise value.But by the end of 2012, the intangible value had increased t迷你倉 US$195 billion taking it to 42 per cent of the enterprise value. This is closer to the global tangible-intangible average of 50 per cent clearly indicating that Singapore companies have started to realise and focus on the importance of intellectual property for growth and expansion, the report said.In terms of sectors, total enterprise value of the top 10 sectors in Singapore is worth US$400.27 billion. The 10 largest sectors in Singapore are Banking & DFS, Telecommunications, Food, Real Estate, Transportation, Distribution/Wholesale, Beverages, Holdings/Group Companies, Engineering & Construction, and Entertainment.These account for 84 per cent of Singapore's total enterprise value and has risen 12 per cent or US$75 billion from the corresponding figure of US$325.20 billion in 2012. According to the report, this indicates healthy growth and a relatively better management of brands across the top 10 segments.In terms of enterprise value, the banking and DFS sector far and away retained their top position with the highest enterprise value of US$108 billion. The telecom sector took second spot with an enterprise value of US$58.61 billion, while the food sector rounded out the top three with an enterprise value of US$47.98 billion.The telecom sector maintained their top position for the highest intangible value of US$41.83 billion followed by the banking sector in the second spot with a total intangible value of US$36.36 billion and the beverages sector in distant third place with a total intangible value of US$16 billion.While some may see them as just the results of a report, these figures are important because they can indicate how successful Singapore is likely to be in some of its future ambitions.For example, thinking it has all the right conditions, the city-state has set out to be the Intellectual Property (IP) hub of Asia. "While this is not an impossible task and objective, it would not be an easy journey given the relative footprint of the industries here compared to other Asian economies," remarked the Brand Finance report.It noted that currently Singapore is ranked 26th in the global rankings of the 2012 Top Country Brands rankings published by Brand Finance. "The starting point for the journey to be the IP hub of Asia should ideally begin with the Brand Singapore itself and the analysis of the contribution from the various brand value drivers," it said.Standardised accountingHowever the numbers clearly show that Singapore companies are more driven by the tangibles over intangibles. "This is not an ideal mix towards the journey of being the IP hub of Asia," it said. "Singapore therefore needs to both actively participate and fundamentally change the ways in which both Singapore and the companies in Singapore manage their IP," the report added.In this regard, it noted however that the full convergence to IFRS by 2012 was a "critical step in a bid to put Singapore on the same footing as other nations and strengthen its role as an international centre of commerce".Having a standardised accounting system means that the value of disclosed intangible assets is likely to increase in the future, Brand Finance noted.In fact, according to some advocates of "fair value reporting" the changes should go further. Specifically, all of a company's tangible and intangible assets and liabilities should regularly be measured at fair value and reported on the balance sheet, including internally generated intangibles such as brands and patents.Meanwhile the actual total value of Singapore's 100 largest brands and brand portfolios in 2013 is US$40.08 billion, an increase of 12 per cent as compared to a 3.5 per cent increase in the 2012 study. These results were in tandem with the moderate economic recovery, as the brand value of most companies across the top 50 brands has increased across industries.The top-heavy nature of the rankings has persisted, with 54 per cent of the brand value vested in the top 10 brands with a combined worth is US$21.80 billion. The top 50 brands account for over 93 per cent of the combined brand value in 2013. But alarmingly, the brand value of the bottom 50 brands has hardly changed as compared with the year before and has remained at just 7 per cent."Unless something is done to continuously improve the brand investment and value growth at the lower end of the market, we will likely see this percentage decline in the coming years," the report concluded.文件倉

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