Accounting for the full value of the business

This report presents the latest analysis produced by CIMA's partner, Brand Finance, for their Global Intangible Financial Tracker (GIFT™) report. The data is focused on Asia, highlighting the powerful trends which are shaping how value is being created.

Accounting for the full value of the business: Brand Finance Asia GIFTTM report
This report draws on and presents the latest analysis produced by CIMA’s partner, Brand Finance,
for their Global Intangible Financial Tracker (GIFT™) report. The data is focused on Asia and highlights powerful trends which are shaping how value is being created, by country and sector, which will have significant implications for prosperity, development and growth in the region and for the world.
The key findings are powerfully brought to life and reinforced by contributions from CFOs from major enterprises and leading brands, as well as the Singapore Accountancy Commission and Singapore Stock Exchange.
Across Asia, total enterprise value in 2015 was $28,194bn (up from 4,640 in 2001) – of which tangibles accounted for $19,596bn (from 3,084) and intangibles $8,598bn (from 1,556). Disclosed intangibles in Asia continued to grow throughout the financial crisis and have been experiencing tremendous annual growth rates ever since.
With most Asian jurisdictions already requiring IFRS reporting and others such as China slowly converging towards the IFRS framework, disclosed intangibles are showing significant resilience to systematic shocks. The global financial downturn in 2008 had a severe impact on undisclosed value but this too has increased substantially in recent years.
Remarkably Asia now ranks second in the world in terms of undisclosed value, in absolute terms – behind the USA. Taking into account disclosed intangibles and goodwill as well, Asia is the world’s third most ‘intangible region’ – behind the USA and Europe.
There is huge opportunity – and considerable likelihood – of future growth fuelled by intangibles. Retail, and internet and software, are still relatively smaller in Asia, when compared globally. Internet giants such as Baidu and Weibo are just two examples of companies that have rapidly caught up with global peers. The Telecoms sector in particular stands out, having reported twice as much intangible assets than the second most intangible sector.
The analysis describes forces in value creation that will become ever more important. Robert McGarvey writing in Futuromics argues that we have entered ‘the third major assets revolution’1 – the first marked the shift from feudal to trading, the second from trading to industrial, the third from physical plant and machinery to intangibles. He argues that after each revolution, the existing systems and processes to manage and report the new asset class and to connect capital to assets were found not fit for purpose. Adaptation was required but took place after the event of the revolution itself.
Arguably the same situation has occurred in the 40 years since the intangible assets revolution first occurred. Regions and countries that recognize this will enjoy competitive advantage in the twenty first century. ‘Accounting for the Full Value of the Business: Brand Finance Asia GIFT report’ provides a comprehensive and revealing analysis of these new patterns of growth and development – it powerfully confirms the rapidly growing value of intangibles across Asia and strongly reinforces the critical role that management accounting can and must play in driving prosperity, building trust, and opening up opportunity across the region.