Dear Editor,

Henley Morgan contributed an article entitled “Why brand Jamaica won’t work for us” to the Jamaica Observer of February 6, 2013. In the course of reaching his conclusion, he stated that United Way’s brand value is estimated to be US$34.7 billion, but despite that, in the year of the valuation (my emphasis), United Way raised only US$13 billion. He then states: “The thing to notice here is the gap between the value of the brand and the economic results the organisation was able to produce.” If Henley is suggesting that the annual amount raised by United Way should approximate United Way’s brand value, then I humbly suggest that he is mistaken.

This brings me, with some trepidation, to the threshold of the murky world of the valuation of intangible assets such as Brands and Goodwill. Let me say first before I receive a call from my learned friends Colin Maxwell, Tarun Handa or Paul Williams, that I am aware that the following is stated simplistically. When company X acquires company Y, International Financial Reporting Standards require that (a) in the books of company X, the value of company Y’s brand be amortised over the brand’s estimated residual useful life, and (b) additionally, company Y’s brand value is tested for impairment annually, and adjusted accordingly should an impairment arise. Phew!

Returning to Henley’s article, and acknowledging that my following suggestion is not strictly in accordance with IFRS standards, his conclusion in respect of this particular point would have been entirely different had he compared the economic results of United Way for that one year with the value of the United Way brand divided by that brand’s estimated useful life. If, for example, United Way’s estimated residual useful life is say 30 years, then the comparison should more accurately be between the $13 billion raised in one year, and $1.16 billion ($34.7 billion divided by 30 years), and not between $13 billion and $34.7 billion as in Henley’s article. Further, in my opinion, unless the annual amounts raised by United Way decline catastrophically, a realistic estimate of the useful life of that entity’s brand would far exceed 30 years, and thus my point is strengthened.

While I do agree with Henley’s general proposition that brand recognition does not automatically translate to brand effectiveness, I do not agree with the illustrative point he tried to make in his United Way example. If I have misunderstood Henley’s intended point, then I apologise and will buy him lunch.

Jeffrey Cobham

jeffreycobham@yahoo.com