Brand Finance GIFT™ 2020
The Intangible Value of the Top 10 Companies in the World Surpasses US$10 Trillion for the First Time
The Brand Finance Global Intangible Finance Tracker (GIFT™) study ranks the top global companies by total intangible value. The top 10 companies this year are Apple, Amazon, Aramco, Microsoft, Alphabet, Facebook, Alibaba, Tencent, Tesla, and VISA.
During the year, the intangible value of these companies started at US$7.2 trillion, then dropped by just shy of US$1 trillion during the COVID-19 crash, and finally skyrocketed to a total of US$10.8 trillion as at 1st September. This enormous volatility points to fundamental flaws in investor understanding of company assets.
Global stock markets have been extremely volatile in 2020 as a result of COVID-19, Brexit, a negative oil price, and the rollercoaster of Biden vs Trump. 2020 is considered to be the most volatile year since 1929, suggesting that most investors do not fully understand the underlying value of the companies they invest in, leaving room for wildly fluctuating share prices and mass panic.
The vast majority (97%) of the US$10.8 trillion of intangible value among the top 10 companies ranked in the Brand Finance GIFT™ 2020 study is undefined and remains undisclosed on company balance sheets. Brand Finance makes strides to narrow this disclosure gap by publishing the value of 5,000 of the world’s most valuable brands each year. Our brand values account for between 3% and 25% of the intangible value of these most intangible companies. The monetary value of other intangibles – technology, rights, relationships – remains unknown.
Brand Finance strongly believes that maintaining the status quo in financial reporting is simply irresponsible. Investors need more information about the nature and value of internally generated intangible assets. Brand Finance polled a representative sample of over 50 experts in the field asking if they agree – 92% think investors need more quantitative information about internally generated intangible assets.
This year, more than ever, has provided proof of the need for more comprehensive reporting of intangible asset value, to facilitate investor understanding and capital allocation.
To achieve this, reporting standards must demand more on the quality of intangible asset reporting. The IASB has launched a discussion paper on this very topic and will accept feedback for the next 10 weeks. Brand Finance encourages all stakeholders to engage in this topic, write to IASB, and demand better disclosure of intangible assets.
This is a once in a generation chance to alter the path of intangible asset reporting. Financial standards are only revisited every 15-20 years and there is a narrow window to effect change.
It is time for a revolution in financial reporting of intangible assets. I firmly believe that companies must do more to disclose the value of their most important assets. Intangibles play an increasing role in the modern economy – it is about time that balance sheets are allowed to reflect that.David Haigh, CEO of Brand Finance
Investors deserve better. They deserve better disclosure about internally generated intangibles, and they deserve a higher quality of the reporting of acquired intangibles. Reporting standards need to go further to guide boards to this greater transparency.Annie Brown, Associate at Brand Finance, and author of the GIFT™ report