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Tony Tollington: Senior Lecturer at Middlesex University Business School, London, UK
Introduction"
By keeping brands off the balance sheet and dismissing the claims of marketing concerning the fruits of its labour, the accounting profession succeeds in preserving its own reputation for integrity, at the expense of the integrity of marketing... Effective regulation depends on reliable information, and in this accounting is inevitably constrained by the uncertainties of the world which it represents. But perhaps it does not illustrate how accounting can misuse the power it gains from control of financial reporting, when the recognition tests which it applies are too restrictive (Oldroyd, 1994, p. 44)"
The above concluding comments are contained in an International Marketing Review article entitled "Accounting and marketing rationale: the juxtaposition within brands" (Oldroyd, 1994). It is an indictment of the accounting profession's treatment of brands to which this paper is a partial response. The focus of this paper is upon the restrictive "recognition tests" which Oldroyd (1994) cites as a reason for the reluctance of the accounting profession to recognise brands as assets, brand assets, on the balance sheet. It specifically addresses the restriction or, more accurately, the "recognition boundary" created by the definition of an asset based upon a "transaction or event" (see Appendix 1). In doing so it shows first how inappropriate the existing transaction or event recognition boundary is for the widespread recognition of brand assets on the balance sheet and, secondly, why the existing attachment of brand assets to purchased goodwill appears to be so strong. As a response to this situation the paper proposes the creation of a new recognition boundary based upon an asset's separable identity which, in respect of brand assets, is underpinned by a new brand asset definition, as follows:
Definition of a brand asset"
A brand asset is a name and/or symbol (a design, a trade mark, a logo) used to uniquely identify the goods or services of a seller from those of its competitors, with a view to obtaining wealth in excess of that obtainable without a brand. A brand asset's unique identity is secured through legal recognition which first protects the seller from competitors who may attempt to provide similar goods and/or services and, secondly, enables it to exist as...