While appreciating their importance, the science of putting a figure on these assets has proved more of a challenge, but innovation in management accountancy is helping change this.
It’s about time.
The growing significance of brand value tells a broader story of an economy increasingly defined by something accountants call ‘intangible assets’.
Be it IP, or the value of customer relationships through to brand equity, these aspects of corporate value that increasingly drive our knowledge-led economy are by definition intangible.
Or at least, they have been up to now.
As an industry comprising people-led businesses, built around creativity, insight and ideas, PR sits at the cutting edge of this intangible economy.
When considered as part of the broader marketing and advertising sector, it is arguably the most intangible sector of the economy globally.
Well over 70 per cent of the average enterprise value for firms in the sector is intangible.
This is another reason why PRs more than others are arguably better placed to understand the significance of intangibles.
I certainly hope so, because it pays to know. More than £1tn of intangible corporate value currently goes unrecognised each year.
It simply slips through the net, as companies fail to recognise, understand and capture the full value of their organisations.
Given the nature of their businesses, PR agencies are at risk of falling into this category.
The good news is that accounting frameworks have been developed that enable an accurate figure to be placed on intangibles.
These ‘global management accounting principles’ coherently recognise the drivers of intangible value such as relationships, communication and trust.
Combined with greater adoption of integrated reporting, companies are better placed to understand, identify and measure their true worth.
These developments have been welcomed by the Chartered Institute of Public Relations and the Chartered Institute of Personnel and Development.
A move to better understanding intangibles can only be a good thing, with the benefits specifically pronounced for the PR sector.
It has been ahead of the curve for some time in appreciating their significance.
By encouraging greater adoption of IR and working in collaboration, management accounts and those in communications can help shape a whole new way of looking at and measuring corporate value.
We are certainly getting closer to a working value for the true worth of reputation.
Tony Manwaring is executive director of external affairs for the Chartered Institute of Management Accountants