Three approaches exist to calculate the value of intangible assets:
- market approach
- cost approach
- income approach
Market approach deprives “Fair Value” from market prices of same or comparable goods.
It is applicable e.g. for real estate properties.
For brands this approach is unsuitable.
On one hand, only few comprehensible brand sales are published. On the other hand few
“comparable goods” exist.
Cost approach deprives “Fair Value” from the costs for reproduction.
For brands this approach – unfortunately often used for rankings – is paradoxical.
A bad brand manager, who inefficiently spent large sums, is rewarded with high brand value.
Income approach calculates “Fair Value” as present value of future economic advantages,
for example royalties.
For brands, this approach is the only suitable one.