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Brand value, accounting standards, and mergers and acquisitions: “The Moribund Effect”

Author

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  • Roger Sinclair
  • Kevin Lane Keller

    (Dartmouth College)

Abstract

“The Moribund Effect” is defined as an accounting phenomenon by which the value of a brand that is acquired, measured, and added to the balance sheet by a company remains unchanged no matter how well the brand might perform for that company over time. We describe accounting conventions for brands in mergers and acquisitions and explain the role of brand value. Our main contention is that the subsequent performance and value of an acquired brand should be reported annually in the Management Discussion and Analysis (MD&A) section of a company’s annual report. If the intangible asset value of the acquired brand has declined, an explanation should be provided to financial markets as to why this occurred. If there is a gain in asset value, it should be announced and explained to those same financial markets. We also review methodological issues in making such calculations, putting some emphasis on understanding the intangible value from brands and trademarks versus customer-related relationships, and we underscore the importance of marketing in guiding and driving these disclosures.

Suggested Citation

  • Roger Sinclair & Kevin Lane Keller, 2017. "Brand value, accounting standards, and mergers and acquisitions: “The Moribund Effect”," Journal of Brand Management, Palgrave Macmillan, vol. 24(2), pages 178-192, March.
    • Handle: RePEc:pal:jobman:v:24:y:2017:i:2:d:10.1057_s41262-016-0025-1
    DOI: 10.1057/s41262-016-0025-1
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    References listed on IDEAS

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    1. Fournier, Susan, 1998. "Consumers and Their Brands: Developing Relationship Theory in Consumer Research," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 24(4), pages 343-373, March.
    2. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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    Cited by:

    1. He, Junnan & Calder, Bobby J., 2020. "The experimental evaluation of brand strength and brand value," Journal of Business Research, Elsevier, vol. 115(C), pages 194-202.
    2. Kanungo, Rama Prasad, 2021. "Uncertainty of M&As under asymmetric estimation," Journal of Business Research, Elsevier, vol. 122(C), pages 774-793.
    3. Joachim Kernstock & Shaun M. Powell, 2018. "Twenty-five years of the Journal of Brand Management," Journal of Brand Management, Palgrave Macmillan, vol. 25(6), pages 489-493, November.
    4. Bendle, Neil Thomas & Wang, Xin (Shane), 2017. "Marketing accounts," International Journal of Research in Marketing, Elsevier, vol. 34(3), pages 604-621.
    5. Shaun M. Powell, 2017. "Journal of Brand Management: year end review 2017," Journal of Brand Management, Palgrave Macmillan, vol. 24(6), pages 509-515, November.

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