How you manage your Intangible Assets can transform your Market Value.
Last year, Ocean Tomo published an extraordinary analysis which concluded that Intangible Assets accounted for an extraordinary 84% of Market Value on the S&P 500.
Tangible Assets accounted for only 16%.
The entire Fixed Assets and Current Assets of the S&P 500 accounted for less than one fifth of Market Capitalisation.
I know that ‘Intangible Assets’ includes a large basket of items, but these numbers are still extraordinary.
IFRS 3 determines that Intangible Assets must be disclosed under five basic categories: Marketing-Related, Customer-Related, Contract-Based, Technology-Based and Artistic-Related.
But what’s even more interesting is this:
According to GIFT 2016, published by Brand Finance in partnership with the Chartered Institute of Management Accountants, the largest proportion of Intangible Assets are not disclosed at all.
They analysed 57,000 companies domiciled across 160+ jurisdictions with a total Enterprise Value of US$89 Trillion.
Their Global Analysis had different results from Ocean Tomo’s, which had been limited to the S&P 500 – but the findings were equally extraordinary.
They found that Net Tangible Assets account for US$46.8 Trillion – or 53% of Total Enterprise Value.
Disclosed Intangible Assets, including Goodwill, accounted for almost US$12 Trillion – or 14% of the world’s Total Enterprise Value.
But ‘Undisclosed Intangible Assets’ accounted for a massive US$30.1 Trillion – or 34% of the world’s entire Enterprise Value.
Let me just confirm what this means:
More than one third of the average Company’s Valuation is created by forces that never appear in their Financial Reporting, and can’t be measured by Market Analysts.
Reputation is a Research and Strategy Consulting Firm that advises CEOs and Boards of Public Companies how to achieve Fair Valuation for their Company’s Stock.