Glossary of Terms
A-Z dictionary of brand valuation terms

Helpful A-Z dictionary of brand valuation terms and their definitions. Learn about Brand Value, Brand EquityEnterprise Value and more.


For more information, see our Branding FAQs and Brand Valuation Methodology.

  • Brand

    There are many definitions of brand, often narrow in scope. To allow us to consider all the touchpoints of the asset, Brand Finance defines a brand as:

    A bundle of trademarks and associated IP which can be used to take advantage of the perceptions of all stakeholders to provide a variety of economic benefits to the entity.

    This is our preferred definition because it appreciates the breadth of the effects a brand can bring, rather than just affecting the price premium of a product. Identifying each element:

    1. This is the accounting definition of a brand when conducting a monetary brand valuation.
    2. The effects brands have are not always directly aligned to the fact but instead to what people believe to be the case.
    3. Brands affect more than customers or consumers. Staff, financiers or external stakeholders are some of the most obvious examples that are also affected by the brand.
    4. Higher staff retention or lower recruitment costs are two benefits beyond simply a price or volume premium that a brand can provide.
    5. Brands apply to more than just companies. Not-for-profits, sports teams and locations are all examples of brands assisting other types of entities.


  • Brand Audits

    A brand audit is a compliance assessment of the commercial and visual aspects of a brand and an interpretation of its impact on current and future financial performance.

    A brand audit will help you to:

    • Understand the condition of your brand portfolio
    • Relate the visual and financial performance of your brand
    • Improve your brand management control
    • Demonstrate accountability for managing your brand
    • Secure your brand's value
  • Brand Due Diligence

    A brand due diligence exercise is a thorough investigation into the brand, the brand management, the market it operates in, any legal protections as well as the overall governance structure supporting the brand.

    This may also be referred to as a 'brand audit' and is most often conducted either when acquiring a new brand, or periodically as an internal check on the state of brand management, brand value and brand governance.

  • Brand Equity

    The term Brand Equity is widely used in the marketing and branding world to describe the relative stature of different brands and to facilitate dialogue around how a brand asset may be measured. As with the term brand, there are a number of alternative senses in which the word is commonly used.

    Feldwick (1996) presents three separate common practice usages of the term Brand Equity:

    1. The total value of a brand as a separable asset when it is sold or included on a balance sheet (Brand value)
    2. A measure of the strength of consumers' attachment to a brand (Brand Strength)
    3. A description of the association and beliefs the consumer has about the brand (Brand Description)

    Brand Finance uses the second definition in its literature. In particular, Brand Equity is used as an element of our Brand Strength Index and covers all stakeholders, not only consumers. It is used as a step in our brand valuation process.

  • Brand Licensing

    Brand licensing is an activity commonly associated with allowing external third parties to use of a brand or trademark. Fee structures vary and may be fixed depending on specific circumstances.

    Brand licensing can also be done internally with a central Brand Company that owns the IP. This can be done to improve management, governance and respect for the brand as a strategic resource.

    Creating a system of central ownership and management for the purposes of managing and licensing brands and IP either internally or externally usually involves forethought and intelligent structuring of the model. The general steps for ensuring that this is done correctly are as follows:

    • Establishing the role of licensing
    • Develop the strategy for licensing growth
    • Build out the model for investment and governance
    • Determine the structure for licensing payments and royalty fees

    Check out our whitepaper on Key considerations for building our a new licensing program for more information about licensing and how Brand Finance can assist.

  • Brand Name

    Brand name is the element of a brand that could be registered as a "wordmark" and form part of the "bundle of trademarks" that constitute the legal protection for a brand.

    Brand name is a term often used when seeking a brand valuation or brand portfolio management services.

  • Brand Rating

    With reference to Brand Finance literature, the term "Brand Rating" is a summary opinion, similar to a credit rating, on a brand based on its strength as measured by Brand Finance's 'Brand Strength Index' (BSI).

    Brand Rating Brand Strength Description
    AAA 80-100 Extremely Strong
    AA 65-80 Very Strong
    A 50-65 Strong
    BBB-B 35-50 Average
    CCC-C 20-35 Weak
    DDD-D 0-20 Failing
  • Brand Strength

    Brand Strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors.

    Conceptually, Brand Stength can be grouped into 3 broad categories of understanding:

    • observing the Brand's current performance
    • accessing the relevant beliefs, associations and attitudes of the consumers' mind
    • estimating the Brand's future performance and profit streams

    This concept may be gauged in both qualitative or quantitative ways and will differ from agency to agency.

  • Brand Strength Index (BSI)

    Brand Finance quantifies the Brand Strength using a 'Brand Strength Index (BSI)' - which is a competitive benchmarking tool that identifies the strength of each brand in question. 

    This can be done as a stand alone exercise in a brand evaluation, or as part of the brand valuation methodology when placing a monetary value on the brand. The Brand Strength Index in this case forms part of the Royalty Relief methodology. For more information check out the methodology page here.

    The Brand Strength Index is a framework that aims to consider the position of a potential licensee or acquirer of the brand. As such we split the Index into three sections:

    • Brand Investment - to ensure brand building exercises are being conducted for future success of the brand.
    • Brand Equity - to ensure the brand is currently perceieved well across a balanced scorecard of stakeholders.
    • Brand Performance - to ensure the brand is delivering the economic benefits that one would hope.

    Brands may score very highly on the Brand Strength Index while not necessarily being the largest brands by monetary value.

  • Brand Valuation methods

    ISO 10668: Brand Valuation, identifies 3 approaches to brand valuation: the market approach, the cost approach and the income approach.

    Market Approach

    The market, or sales comparison approach, measures value in comparison with transactions, for similar brands. This approach requires a detailed evaluation of the comparability of the two brands, considering factors such as the markets in which they operate, relative brand strength, legal protection, and the economic outlook at the times of the transactions. Account has to be taken of the fact that the price negotiated in a transaction may reflect strategic values and synergies that are not available to the present owner.

    Cost Approach

    This approach measures the value of a brand based on the cost invested in building the brand, or its replacement or reproduction cost. It is based on the premise that a prudent investor would not pay more for a brand than the cost to replace or reproduce it.

    Income Approach

    The income approach values a brand as the present value of the future earnings that it is expected to generate over its remaining useful economic life. This is a commonly used approach to value businesses and other assets. Specific assumptions that require research and analysis include the brand’s current cash flows, forecast growth, the risk associated with future earnings, the brand’s useful economic life, and tax considerations. The ISO Standard lists the following income based methods of determining the cash flow attributable to a brand.

    Direct methods (primarily using revenue)

    • Royalty Relief method: Measures the value of the brand as the present value of notional future royalty payments, assuming that the brand is not owned but licensed. This method is widely used for financial reporting and tax valuations as it is aligned with the commercial practice of licensing brands.
    • Price and volume premium methods: Estimate the value of a brand by reference to the price premium and/or volume premium that it generates. In situations where a brand yields both a profit and volume premium, both methods should be applied. Consideration should also be given to cost efficiencies resulting from the brand.

    Indirect methods (primarily using profit)

    • Income-split method: Values the brand as the present value of the portion of economic profit attributable to the brand. Behavioural research is used to determine the brand’s contribution to economic profit.
    • Multi-period excess earnings method: Values the brand as the present value of the future residual cash flow after deducting returns for all other assets required to operate the business.
    • Incremental cash flow method: Identifies the cash flow generated by a brand in a business through comparison with a comparable business which does not own a brand.

    Brand Finance uses the Royalty Relief method for its public rankings, however frequently uses other methods for clients to suit their specific need and situation.

  • Brand Value

    Brand Value is the capital value of economic benefits brought to an entity through use of a brand. This is most commonly done as net present value of the estimated additional future cash flows generated by the Brand for the organisation.

    The accepted standard on how to calculate brand value is ISO 10668:Brand Valuation, in which 3 broad approaches are accepted. The most commonly used of those is the Income approach, which has 6 accepted methodologies that use either future revenue or profit estimates to conduct the brand valuation.

    For more information on Brand Valuation, have a read of our whitepaper on Value-Based Brand Management - Conducting Brand Valuations

    For our rankings, like the Global 500, Brand Finance uses the Royalty Relief (also known as Relief from Royalty). For more information check out the methodology page here.

    Brand Value is also used by some interchangeably with Brand Equity. Brand Finance considers the two terms to be separate.

  • Brand Value Added

    Brand Value Added (BVA®) is Brand Finance's proprietary method of determining the proportion of the residual economic profit attributable to the brand. This analysis is based on a comprehensive appraisal of market research available within the business unit.

  • BrandBeta

    BrandBeta® is Brand Finance's proprietary method for adjusting a weighted average cost of capital (WACC) to arrive at a specific discount rate for each brand (based on its Brand Rating).

    Companies with stronger brands are more resilient and less volatile than those with weaker brands.

  • Branded Business

    Some people are of the view that ‘brand’ refers to the whole branded enterprise. We call this the Branded Business. This may not be a formal company but instead a cash generating unit operating under a single brand. A company with a large number of brands in its portfolio such as Unilever may have many branded businesses within its overall enterprise. Other companies operating only one brand the total enterprise value will be equivalent to the branded business value.

    The brand value and any other intangible assets will then exist within the overall branded business value just as any tangible asset might. Intangible assets may not always appear on the balance sheet of the branded business.

  • Capital Asset Pricing Model (CAPM)

    A financial model in which the cost of capital for any stock or portfolio of stocks equals a risk-free rate plus a risk premium that is proportionate to the systematic risk of the stock or portfolio.

    Brand Finance uses CAPM in the calculation of the discount rate used in our valuations.

  • Cash Flow

    Cash that is generated over a period of time by an asset, group of assets, or business enterprise. It may be used in a general sense to encompass various levels of specifically defined cash flows. When the term is used, it should be supplemented by a qualifier (for example, "discretionary" or "operating") and a specific definition in the given valuation context.

  • Discounted cash flow (DCF)

    A method of evaluating an asset value by estimating future cash flows and taking into consideration the time value of money and risk attributed to the future cash flows.

  • Effective Date

    Also known as Valuation Date or Appraisal Date.

    The specific point in time, as of which the valuator's opinion of value applies.

  • Enterprise value

    The combined market value of the equity and debt of a business less cash and cash equivalents.

    Enterprise value can be seen as the total value that a business would be worth if it was in a position of zero debt. In most instances it is a more appropriate measure of value than market capitalisation, because it does not take into account who owns the company, but simply by how it is run. The exception to this rule is the financial service sectors (whose business is lending and receiving money, so the calculation to add on debt does not work and leads to spurious figures). 

    Brand Finance use enterprise value as a benchmark for our brand valuations, since brand is one of the many assets that make up the business. If you add up all the assets in a business (both tangible, like buildings and machines, and intangible, like patents, airport landing slots, a trained-up workforce, and also Goodwill) this gives you the enterprise value. Brand value is one piece in this puzzle (a bigger or smaller piece in different industries).

  • Goodwill

    Goodwill recognised in a business combination is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. The future economic benefit may result from synergy between the identifiable assets acquired or from assets that, individually, do not qualify for recognition in the financial statements.

    Goodwill is an intangible asset and its value is the balancing figure between total consideration paid in a business combination and the total of all other identified assets.

    Goodwill is generally treated as having an indefinite useful life so not amortised in company accounts but instead requires annual impairment reviews.

    Prior to the introduction of IFRS 3: Business Combinations, Goodwill was used to refer to all Intangible assets.

    Check out our whitepaper on Goodwill Hunting: How Not to Miss the Mark in Financial Accounting for more information about reporting goodwill and how Brand Finance can assist.

  • IAS 36 - Impairment of Assets

    The objective of IAS 36 is to prescribe the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and the Standard requires the entity to recognise an impairment loss. The Standard also specifies when an entity should reverse an impairment loss and prescribes disclosures.

    IAS 36 applies to (among other assets):

    Land, buildings, machinery and equipment, investment property carried at cost, Intangible Assets, goodwill, investments in subsidiaries, associates, and joint ventures, assets carried at revalued amounts under IAS 16 and IAS 38

    IAS 36 does not apply to:

    Inventories (IAS 2), assets arising from construction contracts (IAS 11), deferred tax assets (IAS 12), assets arising from employee benefits (IAS 19), financial assets (IAS 39), investment property carried at fair value (IAS 40), certain agricultural assets carried at fair value (IAS 41), insurance contract assets (IFRS 4), assets held for sale (IFRS 5).

  • IAS 38 - Intangible Assets

    An intangible asset is an asset - A resource controlled by an entity as a result of past events from which future economic benefit is expected to flow - but with the additional features of being an identifiable non-monetary asset without physical substance, where identifiable means it is separable from the entity or arises from contractual or legal rights.

    The objective of IAS 38 is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another IAS. The Standard requires an enterprise to recognise an intangible asset if, and only if, certain criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires certain disclosures regarding intangible assets.

    IAS 38 applies to all intangible assets other than:

    • Financial assets
    • Mineral rights and exploration and development costs incurred by mining and oil and gas companies
    • Intangible assets arising from insurance contracts issued by insurance companies
    • Intangible assets covered by another IAS, such as intangibles held for sale, deferred tax assets, lease assets, assets arising from employee benefits, and goodwill. Goodwill is covered by IFRS 3

    Please note this is a summary of IAS 38, for more detailed information please contact Brand Finance, or visit

  • IFRS 3 - Business Combinations

    IFRS 3 outlines the accounting treatment following a business combination, which originally referred to bother mergers of equals as well as acquisitions, however since revisions in 2008, one entity must be deemed the acquirer.

    Intangible asset treatment in IFRS 3

    Prior to IFRS 3, intangible assets had been referred to simply as Goodwill. The need to identify all assets gave rise to five intangible asset classes with Goodwill now as a balancing figure. The five classes are as follows:

    • Artistic-related intangible assets
    • Marketing-related intangible assets
    • Technology-based intangible assets
    • Customer-related intangible assets
    • Contract-based intangible assets

    Brand value sits within the marketing-related intangible assets.

    Areas not covered in IFRS 3

    IFRS 3 does not apply to the formation of a joint venture, combinations of entities or businesses under common control. The IASB added to its agenda a separate agenda project on Common Control Transactions in December 2007. Also, IFRS 3 does not apply to the acquisition of an asset or a group of assets that do not constitute a business.

  • Intangible Asset

    In accounting terms, an asset is defined as: a resource that is controlled by the entity as a result of past events from which economic benefits are expected to flow to the entity. The International Accounting Standards Board definition of an intangible asset requires it to be: an identifiable, non-monetary asset without physical substance, where the identifiability criteria is that the asset is separable from the organisation or arises from contractual or legal rights.

    There are three types of intangible asset: 

    Leases; distribution agreements; employment contracts; covenants; financing arrangements; supply contracts; licenses; certifications; franchises.

    Trained and assembled workforce; customer and distribution relationships.

    Intellectual Property:
    Trademarks; patents; copyrights; proprietary technology (e.g. formulas; recipes; specifications; formulations; training programs; marketing strategies; artistic techniques; customer lists; demographic studies; product test results; business knowledge - processes; lead times; cost and pricing data; trade secrets and know-how).

    Internally generated intangible assets

    Most intangible assets that appear on balance sheets have been acquired, however some internally generated intangible assets can be capitalised provided they can be reliably valued and the costs in creating them be distinguished from maintenance costs or general expenses. This means the most frequently seen are software and patents or other forms of technological IP.

    This results in what is sometimes described as 'internally generated goodwill'. This is the difference between the fair market value of a business and the value of its identifiable balance sheet net assets. The treatment of this goodwill only changes if the company is acquired, converting the goodwill from internally-generated to acquired.

    Acquired Intangible Assets

    As specified in IFRS 3: Business Combinations, intangible assets of the three types above should be identified, valued and then grouped into the following classifications upon acquisition:

    • Artistic-related intangible assets
    • Marketing-related intangible assets
    • Technology-based intangible assets
    • Customer-related intangible assets
    • Contract-based intangible assets

    There is then a balancing figure which is referred to as Goodwill. Prior to 2008, all intangible assets were referred to as Goodwill.

  • ISO 10668 - Brand Valuation

    The International Standard ISO 10668 specifies requirements for procedures and methods of monetary brand value measurement. ISO 10668 specifies a framework for brand valuation including objectives, bases of valuation, approaches to valuation, methods of valuation and sourcing of quality data and assumptions. It also specifies methods of reporting the results of such valuation.

    Intangible assets are recognised as highly valued properties. Arguably the most valuable but least understood intangible assets are brands. The International Standard ISO 10668 provides a consistent, reliable approach to brand valuation including financial, behavioural and legal aspects.

    ISO (the International Organization for Standardization) is a worldwide federation of national standards bodies (ISO member bodies). The work of preparing International Standards is normally carried out through ISO technical committees. Each member body interested in a subject for which a technical committee has been established, has the right to be represented on that committee.

    ISO 10668 specifies 3 types of analysis must be done during a brand valuation:

    • legal analysis of the trademarks and IP
    • behavioural analysis of stakeholders perceptions and response to the brand
    • financial analysis of the current and future earning potential of the brand

    The standard also sets forth 3 objectives of the valuer

    • Transparency: others must be able to understand how the valuation has been conducted.
    • Consistency: if other valuers use the same method with the same source information, they should be able to replicate the results.
    • Independency: those who create the brand or have vested interests in the outcome of a valuation should not conduct it.
  • Mid Year Discounting

    Mid-Year Discounting - a convention used in the Discounted Future Earnings Method that reflects economic benefits being generated at midyear, approximating the effect of economic benefits being generated evenly throughout the year.

  • Net Present Value

    The present value of an asset's Net Cash Flows (minus any initial investment).

    Net present value is sometimes referred to as net present worth (NPW) and is considered a standard method used for capital budgeting, and more widely throughout economics.

    Net present value is also a good technique for avoiding the distortions caused by historical accounting conventions.

    The discounted cash flow is similar.

  • Present Value

    Present Value is the value, as of a specified date, of future Economic Benefits and/or proceeds from sale, calculated using an appropriate Discount Rate.

  • Report Date

    Report Date is the date conclusions are transmitted to the client.

  • Reputation

    Reputation decribes the perceptions of the brand, which gives it power and drives its value. It is based on both real and perceived performance of the products and sevices, and affects stakeholder perceptions and behaviour.

    Under accounting rules, reputation does not satisfy the identifiability criteria of an asset since it is neither seperable nor does it arise from contractual or legal rights. As such Brand Finance considers reputation to be an important element contributing to brand value, but not to be an asset itself.

  • Royalty Relief

    The 'Royalty Relief' (also known as Relief from Royalty) method is based on the notion that a brand holding company owns the brand and licenses it to an operating company. The notional price paid by the operating company to the brand company is expressed as a royalty rate. The Net Present Value (NPV) of all forecast royalties represents the value of the brand to the business.

    The attraction of this method is that it is based on commercial practice in the real world. It involves estimating likely future sales, applying an appropriate royalty rate to them and then discounting estimated future, post-tax royalties, to arrive at a NPV.

    Brand Finance uses the 'Royalty Relief' method for the following reasons:

    1. It is favored by tax authorities and the courts because it calculates brand values by reference to documented, third-party transactions.
    2. It follows the same principles as a discounted cash flow so can be readily understood by those with a business valuation background or other financial audiences.
    3. The input assumptions can be replicable and transparent, with the most contentious assumptions being the royalty rate applied and the useful economic life.
    4. It can be done based on publicly available financial information.

    For more information on the steps involed in a Royalty Relief brand valuation, please see our methodology page.

  • Rule of Thumb

    A ‘Rule of Thumb’ exists within the licensing industry which states that, on average, a licensee would expect to pay approximately 25%-40% of its expected pre-tax profits for access to the Intellectual Property (which could include brands) attached to the license itself.A ‘Rule of Thumb’ exists within the licensing industry which states that, on average, a licensee would expect to pay approximately 25%-40% of its expected pre-tax profits for access to the Intellectual Property (which could include brands) attached to the license itself.

    Often refered to as the 'Rule of 25%' it is commonly referred to in transfer pricing studies and legal cases and is supported empirically (Robert Goldscheider, John Jarosz & Carla Mulhern, ‘Use of the 25% Rule in Valuing IP’, 37 Les Nouvelles 123-124 (December 2002)). The theory behind the Rule of 25% is that whilst both licensor and licensee should share in the profits resulting from the IP being licensed, it is usually the licensee that takes the majority of profits for its role in exploiting the property, bearing risk and providing a return on the other assets in its business.

    It should be noted that following a US judgement in 2011, the Rule of Thumb cannot be used as the basis for patent damage in the US. Its use in valuations should always be corroborated with other analysis where possible.


  • Terminal Value

    Terminal Value (also known as residual value or perpetuity value) - the value as of the end of the discrete projection period in a discounted future earnings method.

    This is often a material part of a brand valuation because we deem a brand to have an indefinite useful life in most situations.

  • Useful Economic Life (UEL)

    The period of time over which an asset may generate economic benefits.

    All brand valuations featured on Brandirectory are conducted under the assumption that brands have an indefinite useful economic life.

  • Valuation Date

    Also known as Effective Date or Appraisal Date

    The specific point in time as of which the valuator's opinion of value applies.

  • Weighted Average Cost of Capital (WACC)

    Within Brand Finance literature, WACC refers to an average representing the expected return on all of a company's securities. Each source of capital, such as stocks, bonds, and other debt, is assigned a required rate of return, and then these required rates of return are weighted in proportion to the share each source of capital contributes to the company's capital structure.

    Brand Finance have developed a proprietary method for adjusting WACC, called BrandBeta (βrandβeta®).