Brand on the balance sheet: Could changes to accounting rules strengthen marketing?
Following an ongoing review of accounting rules, brand could be counted as an asset on companies’ balance sheets, but would this bolster marketing’s role within businesses?
For many CMOs, ensuring their business, and in particular finance, views marketing as an investment rather than an expense is crucial to their role.
Investing in marketing builds brand, which in turn bolsters business. It’s therefore important for finance, as well as investors, to be bought into this view so that marketing isn’t at risk of being the first thing to be cut.
Under current accounting rules, marketing is generally recorded on the income statement as an operating expense, which is then subtracted from revenue to determine profit. This is in contrast to other costs, which are determined as capital expenditure (CapEx), meaning they are not expensed immediately.
Costs can be capitalised when they are recorded on the balance sheet as an asset. For example, the cost of new factories might be capitalised, in recognition of the long-term value they will bring over many years.
Marketers might view brand in a similar way, and, therefore, think that marketing spend ought to be capitalised in the same way. However, current international accounting standards mean that internally generated intangible assets, meaning those that do not physically exist, are not allowed to be capitalised in financial statements.
