ICAI working on brand norms

A "basic draft" of the study was prepared by Mumbai-based chartered accountants Homi S Albara and Raghu Iyer. The draft has been considered by the research committee of the institute and final modifications are being made according to its suggestions. The study was meant to discuss the valuation of brands for balance sheet purposes and for acquisition under the schemes of amalgamation or otherwise, Roy told to The Indian Express. "At the moment, there is no plan to suggest any specific change in law. The suggestions, which are being made in the study, would provide guidance in respect of these aspects," he added.

The Financial Reporting Standard 10 ongoodwill and intangible assets issued in December 1997 in the UK and the Accounting Principles Board, Opinion No 17 on intangible assets which came into effect from June 1, 1996 in the US, govern the generally-accepted accounting standards. The International Accounting Standards Committee has also issued an exposure draft on intangible assets.

According to these documents, brands can be recognised as assets if they are purchased, Roy said. "The internally-generated brands are not likely to fulfil the criteria for recognition as assets," he added. According to FRS 10, "Purchased goodwill and intangible assets should be capitalised as assets. Internally-generated goodwill should not be capitalised and internally-developed intangible assets should be capitalised only when it has a readily ascertainable market value."

Moreover, intangible assets other than licences, franchises and quotas, which do not belong to a homogenous population of assets and do not have an active market are unique by nature. Althoughthere might be assets which are similar, they are not equivalent in all material respects and so do not have readily ascertainable market values.