M.Comm. / Intangible assets are increasingly becoming the critical determinant of value creation and future profitability of most businesses. There is a clear distinction between the accounting treatment of physical assets and are reported on the firm’s balance sheets, but intangible assets are by large written off in the income statement, along with regular expenses such as wages, rents and interest. This distorted treatment of intangibles in an accounting sense, has dire consequences for managers, investors and policymakers relying on financial information, thus giving an extremely limited view of a company’s potential for value creation and are virtually worthless as a basis for assessing the value of intangible assets as a whole. This paper is limited to the valuation of intellectual property and intangible assets not reflected on the balance sheet and is primarily aimed at researching, exploring and identifying various intangible asset valuation techniques used to make investment decisions; the advantages and disadvantages of each valuation method so identified; identifying which one or more of the valuation methods identified is the most appropriate measure to valuate intangible assets; identifying the accuracy of the most appropriate valuation method selected as compared with the other methods. The problems posed by intangible assets appear to be based on two levels. The first is the difficulty to identify, collect and analyse data regarding intangible assets. The second overlapping level is the lack of external financial reporting on intangibles. The problem herein manifests itself in the lack of recognition of the current accounting principles, thus resulting in intangible assets not being systematically reported in financial statements leading to a lopsided view of the assets employed by a company to generate revenues.

In praktyk word daar talle probleme met die rekeningkundige verantwoording van ontasbare bates ervaar. Hierdie probleme kan in vier hoof kategorieë verdeel word naamlik die identifikasie, erkenning, tydsgaping en meting van ontasbare bates (sien hoofstuk 2). Van al hierdie probleme is die metingsprobleem die grootste, m.a.w behoort ontasbare bates teen koste of teen billike waarde gemeet en in die state ingesluit te word? Daar is talle argumente teen die gebruik van beide en díe word in detail in hoofstuk 2 uiteengesit. Dit is die skrywer se mening dat billike waarde ‘n baie beter maatstaf vir sodaninge bates is, omdat koste gebaseerde maatstawwe nie altyd relevant is nie. Die grootste kritiek teen die gebruik van billike waarde -maatstawwe is egter dat dit onbetroubaar, ingewikkeld, duur en wisselvallig kan wees. Daar is ook vrese dat die openbaarmaking daarvan nadelig vir maatskappye se kompeterende voordeel kan wees.Die probleem wat rekeningkundiges in die gesig staar is dus eerstens om die kwalitatiewe eienskappe van relevantheid en betroubaarheid teen mekaar op te weeg. Indien hulle tot die gevolgtrekking kom dat relevantheid in hierdie geval belangriker is as betroubaarheid moet die kwessies van koste, ingewikkeldheid en wisselvalligheid steeds aangespreek word. Hierdie studie bestudeer benaderings en metodes om ontasbare bates teen hulle billike waarde te meet, ten einde te bepaal of sodanige metodes wel die kritiek daarteen kan oorkom, m.a.w. kan sodanige billike waarde -metodes wel ‘n betroubare, koste-effektiewe, verstaanbare en stabiele aanwysing van waarde verskaf? / Prof. D Coetsee

[Truncated abstract] The primary aim of this study was to examine, and compare, the value relevance and any bias associated with the reporting of intangible assets in Australia and the US over the ten-year period 1994 to 2003. The study adopts a disaggregated form of the Feltham and Ohlson (1995) valuation model and associated linear information models (LIMs) to allow goodwill and identifiable intangible assets to be separately examined using unbalanced panel regression analysis. The results for the Australian sample suggest that the adaptation of the Feltham and Ohlson (1995) valuation model used in this study is particularly useful in examining Australian equity securities. For example, the pooled sample analysis results in an adjusted R2 of 71%, which is consistent with similar US studies by Ahmed, Morton and Schaefer (2000) and Amir, Kirscenheiter and Willard (1997). Further, the results from the disaggregated Feltham and Ohlson (1995) valuation models suggest that the information presented with respect to intangible assets (both goodwill and identifiable intangible assets) under Australian GAAP is value relevant. However, the results from the valuation models also suggest that (for the average Australian company) the market believes goodwill is reported conservatively and identifiable intangible assets aggressively. ... As noted earlier, the increasing importance of intangible assets in the `new-economy’ suggests that (wherever possible having regard to the measurement difficulties) all intangible assets should be recognised in financial statements to maximise the value relevance of those statements. It should be noted, however, that there was some evidence to suggest that certain Australian companies (that is, those not consistently reporting positive abnormal operating earnings) might be reporting goodwill and/or identifiable intangible assets aggressively and this is an area that standard setters might need to carefully consider in future. I trust that the findings presented in this study will prove helpful to both researchers and those involved with formulating international accounting standards in this particularly difficult area of intangible assets. I also hope the results will help to allay any fears regulators (and others) might have that providing managers with accounting discretion will (necessarily) lead to biased reporting practices; based on the findings of this study for the majority of Australian and US companies, any such fears appear unwarranted.

The purpose of this research was to demonstrate the importance of brand equity in the purchase of consumer durable goods, specifically heating, ventilation and air conditioning (HVAC) systems.