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The increasing importance of branding Combinations” requires acquired brands and otherintangibles (provided they arise from contractual or Intangible Assets” then sets out the appropriateaccounting treatment of intangibles postacquisition, with the requirement for impairmentreviews to be conducted in certain circumstances.Finally, a new International Accounting Standard brands and other intangibles was affected by theEuropean Court of Justice (“ECJ”) ruling thattransfer pricing rules between UK and continental implement this took effect on 1 April 2004.As aresult, Brand Finance is assisting IP-owning companies in the UK with their reviews of internallicensing arrangements.We now discuss in more detail specificapplications of tax planning connected with brandsand IP management. combinations entered into on or after 31 March2004 and requires acquired intangibles to berecognised separately from goodwill provided theirfair values can be measured reliably. Tax planning and brands valuations help to support companies againstclaims made by the tax authorities regarding the brand management organisations which then chargeroyalties to operating subsidiaries around the world. Until the mid-1990's, organisations would generallyallow their affiliates to use their brands for little orno charge. Some companies allowed their affiliatesto use the brands completely free, or otherwise they will certainly be required. merely passed on direct costs on a cost-sharingbasis.Organisations may have charged for the useof their technology or for their management timebut tended to allow the brand name to be used atno cost. and measure the profit contribution from differentgeographical and business divisions. Severalleading edge companies are now taking the issue ofinternal licensing so seriously that they are creatingcentral trademark holding companies. This meansthat the ad hoc trademark and licensing system thathas grown up over the years is replaced by asystem where one company - the trademarkholding company - holds all the group’s trademarksand licences. The most famous examples of this to substantiate internal royalty rates.Many taxauthorities, including the Inland Revenue and IRS,are prepared to acknowledge independent brandvaluations as a basis for this process. driver for this depends on which company you talkto.Some claim improved efficiency and control ofbrand management (e.g. Shell) while others admit itis primarily about the tax benefits. company which is a wholly owned subsidiary of anUK company is a separate legal entity, andtherefore can only use the trademark after receiving explicit or implicit permission.It could be argued that formally granting a licencebetween different parts of the same company – of central research facilities or for shared productionfacilities, operating companies also pay for brandsthey are using. The charge made for the use of abrand is seen to relate directly to the value of theasset being licensed.All companies which own trademarks, copyrightsand licences should continually audit the inter-groupuse of those assets. There is increasing evidencethat managing, protecting and developing suchintangible assets requires specialist marketing andfinance skills, and therefore, all such assets shouldbe held and managed centrally. argue that formalising the relationship betweenthose who own the brand and those who use it actsas an incentive to maximise the use of the licensedbrand rights, and to ensure that the rights and the use of brands by their subsidiaries. Lower taxrates in the country of brand ownership means such approach to the issues across all territories. Withoutcentral co-ordination local management may be toofastidious or too lax in registering trademarks, or inpursuing legal action for real or imaginedinfringement of the trademarks.Many argue that management of the brand is directed. It will, forexample, be difficult for management to justify why CIL ensures that the value of brands is moreacutely appreciated across a group in areas suchas finance and legal. Over the years, manymarketers have argued that they alone haveunderstood and appreciated the value of thisparticular class of assets.CIL backs up thecentralised marketing concept, where marketingresource is shared and co-ordinated, maximisingthe homogeneous nature of brand image, productdevelopment and advertising.CIL generates aholistic, group-wide approach to brand licensingensuring that the management and development ofthe brand is controlled for the whole of the groupand not just one part of it, which may have anarrow or particular focus.Despite the centralisation of brand management, itis still possible to ensure that brand managers inindividual territories are incentivised to ensurebrand value is maintained and enhanced in those the management, control and direction of a brandshould charge for the use of that brand. It should be noted that UK-based companies may encounter problems in transferring their I