By Tatiane Bortolozi and Renato Rostás | From São Paulo
The value of trademarks and clients portfolio acquired from third parties are the main type of intangible asset of Brazilian companies listed on the stock exchange, after the contractual rights, such as public grants, according to a exclusive study obtained by Valor.
The survey conducted by Mazars mapped the way intangibles are recorded in the balance sheets by 12 different sectors. Intangible assets are nonphysical assets considered strategic for bringing competitive advantages, such as internet domains and licenses. In Brazil, it was from the Law 11.638, of December 2007, which came into existence a place for them in company’s balance sheets.
"There was not a consolidated view of how it is done in practice the recording of intangible assets by sector in Brazil. The proposal was to produce a diagnosis of our reality," says Fabio Pecequilo, director of Mazars. He and Kenzo Otsuka, also a director, were responsible for the research.
The firm analyzed the financial statements of 2012 and 2013 of 228 public companies, assembled according to the relevance of their market value or by the listing in one of the segments of the stock exchange’s governance.
Contractual rights, such as concessions of energy companies and highways have more importance on the balance sheets, which is not exactly new.
"The characteristic of the Brazilian stock market is to be composed of public companies. As one of the intangibles that is usually evaluated in merger and acquisition transactions is the right to use, to exploit, this reflection on the global average was expected," said Otsuka.
Contractual rights accounted for 39% of recognized intangibles over the past two years, followed by those related to customers and brands, with about 5% each. Excluding public utility companies, such as of power generation, the value of the rights related to contracts represents only 4% of transactions and is outnumbered by the price paid by customer portfolios (10.4%) and trademarks (9.4%), the study shows.
As a means of comparing, a survey conducted by KPMG audit and consultancy with 342 global companies that have adopted international accounting standards in transactions between 2003 and 2007 shows a similar trend. In three main sectors - consumer goods and services, health care and media and entertainment -, brands and customer base were the main intangibles. In health care, technology assets also stood out on account of patent registrations.
In Brazil, the value of intangible assets in business combinations between oil, gas and biofuels companies and public utility companies was composed of virtually all contractual rights in 2012 and 2013.
In the case of oil companies, a sector dominated by the state-owned Petrobras, much of this value is related to the right to exploit the pre-salt fields. In the public utility companies, the record comes from concession contracts inherited from privatizations that took place in the 90’s.
The most active sectors in recognition of intangibles were the technology and education. In the first sector, most of them are related to synergies, while education excels in clients portfolios, brand and quality licenses required for higher education courses.
The main sources of intangible assets are mergers and acquisitions, something in which companies of technology and education were quite active in recent years.
"Companies that make more transactions and become more involved with foreign investors are more aligned with international practice," says Pecequilo, justifying the leadership of these companies in terms of quality in asset allocation.
According to Robison Meira, partner at audit and consulting firm BDO, the intangibles have been the most discussed pronouncements since its implementation, in 2008. Outside the context of business combinations, the main way to put them on the balance sheet is through advances in product development.
"Companies have adapted processes and controls to be able to meet the pronouncement and therefore registering in intangible assets the costs of product development, which will be amortized over the expectation of the recovery of the investment," said Meira.
For him, the balance sheets could use more frequently the pronouncements, but they often bump into leaner budgets and few investments in the development area.
According to José Roberto Kassai, Financial, Accounting and Actuarial Research Foundation’s (Fipecafi) professor, surveys produced abroad, adjusted for the Brazilian reality, are references to compare industries with similar results. From Mazars’ study , you can have a more accurate picture of the reality of the country.
Since 2009, when the Brazilian Securities Commission (CVM), the capital market regulator, has signaled that the accounting for rights after obtaining the grant would be allocated either in intangible or in the financial, Brazil conflicted with international standards accounting - adopted by the country a year later. The concession right, by the rules known by its English acronym IFRS, are in fixed assets. The United States, which have their own rules, also permit the accounting as intangible.
Not all public utilities have to adopt the accounting standard IFRS, according to guidance issued in 2011. While highways operators and power distributors and transmitters must apply the rule, companies operating railroads and most electricity generators are exempt from the requirement.
The Board of International Accounting Standards (IASB) is under negotiation with american regulators for possible adjustment of the method to record regulatory assets.