## Payments for Nonproduced Knowledge-Based Capital — Marketing Assets ## Source details **Canonical URL:** [Payments for Nonproduced Knowledge-Based Capital — Marketing Assets](https://www.imf.org/-/media/files/data/statistics/bpm6/gztt/g9-payments-for-nonproduced-knowledgebased-capital-marketing-assets.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/bpm6/gztt/g9-payments-for-nonproduced-knowledgebased-capital-marketing-assets.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/bpm6/gztt/g9-payments-for-nonproduced-knowledgebased-capital-marketing-assets.pdf.json) --- ### Background and conceptual issue - Marketing assets (examples: brand names, logos, trademarks, mastheads, domain names) are important in the global economy and can add significant value when added to a good or service. - Firms expend resources to differentiate products and generate brand value; marketing assets play a key part in global value chains and, because of their intangible nature, play a part in efforts to shift profits within multinational enterprise groups. - The System of National Accounts, 2008 (2008 SNA) and the Balance of Payments and International Investment Position Manual, sixth edition (BPM6) classify marketing assets as nonproduced non-financial assets. - Nonproduced non-financial assets are distinguished by coming into existence in ways other than through processes of production and are classified into three categories: (i) Natural resources; (ii) Contracts, leases, and licenses; and (iii) Goodwill and marketing assets (2008 SNA paragraph 10.164). - Conceptual tension: marketing assets often appear to satisfy SNA criteria for produced assets because corporations deliberately create them through investments and spending under direct management and control, and the assets are used repeatedly in production to identify and differentiate products and establish price and market share. ### Four transaction types identified - The Guidance Note identifies four broad types of transactions involving marketing assets: - (i) payments for the use of a marketing asset (franchise fee), which do not involve transfer of economic ownership but give rights to use under set conditions; - (ii) outright acquisition/sale of a marketing asset, entailing transfer of economic ownership of the underlying asset; - (iii) payments to sub-license a marketing asset, which can be considered a license to reproduce and may qualify as an asset if it satisfies the asset requirements; - (iv) creation of a marketing asset, which if considered produced needs recording in the capital account as gross fixed capital formation. ### Existing guidance and research context - BPM6 paragraph 13.17 and 2008 SNA paragraph 10.198 list items such as brand names, mastheads, trademarks, logos, and domain names as marketing assets. - The 2008 SNA states a brand may be more than a corporate name or logo and can encompass characteristics of goodwill such as customer loyalty. - The 2008 SNA recognizes marketing as a key driver of brand value and that corporations invest to build and support brands, yet does not identify marketing assets as produced fixed assets primarily because their value is difficult to measure (paragraph A4.53). - Limited internationally coordinated research since the last SNA update: - Research by Statistics Netherlands in 2008 included brand equity and showed capitalization of certain advertising expenses is an option. - Corrado, Hulten, and Sichel (2005 & 2009) have included marketing assets as capital formation in U.S. analyses. - International Accounting Standards (IAS 38) treat marketing assets similarly to 2008 SNA: only assets acquired separately that meet recognition requirements may be recognized; internally generated marketing assets are indistinguishable from costs of developing a business and should be expensed. ### Options considered (high level) - Two proposed options and necessary updates to 2008 SNA and BPM6 are examined: - Option I: Treat marketing assets as produced non-financial assets (expand IPP with a marketing-assets subcategory). - Option II: Maintain marketing assets as nonproduced non-financial assets and provide consistent guidance for recording related transactions. ### Option I — Treat marketing assets as produced non-financial assets - Conceptual change: - Include marketing assets in the list of fixed assets in SNA under the category of intellectual property products (IPP), with a new sub-category for marketing assets; the current nonproduced asset category of goodwill and marketing assets would become solely goodwill. - Payments for the Use of a Marketing Asset (franchise fee) - If marketing assets are produced, no element of property income would exist in franchise fee payments; the entire franchise fee would be recorded as output in the form of the sale of a service. - BPM6 would need updating to remove advice in paragraph 10.140 to, where possible, record a portion of the transaction as primary income; BPM6 paragraph 13.13 already states payments for temporary rights to use or reproduce IPP are recorded as a service and marketing assets would fall under this. - Outright Acquisition/Sale of a Marketing Asset - Outright acquisition or sale would be recorded in national accounts capital account under gross fixed capital formation, with value equal to purchase/sale price. - Consumption of fixed capital would require estimation for marketing assets despite absence of physical wear and tear; parameters (life expectancy, depreciation profile) may differ across industries and sectors (example: technology sector assets may depreciate quicker than automobile industry assets). - In the balance of payments, acquisition/sale would be recorded in the goods and services accounts; item breakdowns would need expansion to include a category for marketing assets, likely under other business services. - Sub-Licensing a Marketing Asset - Payments to sub-license can be considered a license to reproduce and may qualify as an asset if it satisfies asset requirements; if a license allows reproduction and transfer of distribution/support responsibility, it should be regarded as the sale of part or whole of the original. - Creation of a Marketing Asset - Creation would be recorded in the capital account as gross fixed capital formation; for assets created within a firm, valuation could follow the approach for own-account R&D, valuing on the basis of costs of production. ### Option II — Maintain marketing assets as nonproduced non-financial assets - Need for consistent guidance: - If maintained as nonproduced, consistent guidance is recommended in SNA and BPM because current 2008 SNA and BPM6 lack full consistent guidance on recording marketing-asset-related transactions and are short on clear recommendations for nonproduced non-financial assets other than natural resources. - Payments for the Use of a Marketing Asset (franchise fee) - 2008 SNA does not give specific advice on recording franchise fees; BPM6 paragraph 10.140 advises that franchise fees and trademark revenue include aspects of property income as well as services and that, in principle, splitting income and service elements is desirable but may not be feasible; conventionally the entire values are classified as charges for the use of intellectual property unless additional information allows a split. - Implementing a split raises the issue of how property income earned on marketing assets should be recorded under current SNA: 2008 SNA paragraph 7.107 states property income accrues when owners of financial assets and natural resources put them at the disposal of other units; marketing assets are not financial assets and are excluded from natural resources, so they do not give rise to investment income or rent under current definitions (paragraphs 7.107–7.109 and 10.15). - BPM6 similarly offers no specific recording option for property income related to marketing assets; absence of a further category within property income prevents recording payments for use of marketing assets as property income under current frameworks. - The possibility exists to record the entire franchise fee as property income where there is no element of a service being provided; BPM6 currently defaults to recording the whole transaction as charges for the use of intellectual property if a split cannot be made. - Outright Acquisition/Sale of a Marketing Asset - Market transactions in marketing assets are recorded in the capital account as acquisition/disposal of a nonproduced asset; 2008 SNA paragraphs 10.196–10.199 recognize difficulties in identifying pure sales of marketing assets, as most transactions involve entire units where marketing assets are embedded. - When sold individually and separately, the transaction is recorded as a transaction in goodwill and marketing assets; given interest, it may be desirable to include a subcategory to goodwill and marketing assets so separately identifiable marketing-asset transactions can be recorded. - In the balance of payments, such transactions are recorded in the capital account as acquisition and disposal of nonproduced non-financial assets between residents and nonresidents. - Sub-Licensing a Marketing Asset - Sub-licensing would be treated as acquisition/sale of part or whole of the nonproduced marketing asset to the licensee; the license is considered an asset and recorded as a transaction in nonproduced assets in the capital account. - Creation of a Marketing Asset - If nonproduced, marketing assets are not brought into existence via production; creation requires no specific recording and related costs are recorded as intermediate consumption and wages for the producing activity (continuation of current practice). ### Recommended approach — conceptual aspects and consensus process - Conceptual view and consensus: - The AEG and Committee members considered marketing assets to be produced assets, but concerns exist about practical feasibility of reclassification; many members thought paragraph A4.53 in the 2008 SNA remains relevant (difficulty of measurement). - The AEG and Committee agreed with the GZTT proposal to obtain countries’ views via a global consultation on feasibility of recording marketing assets as produced non-financial assets. - If global consultation endorses produced classification: - The intellectual property products category needs expansion with a new subcategory to separately identify marketing assets within IPP. - BPM6 paragraph 10.140 would be updated to reflect that marketing assets are produced assets and that payments for use are treated as services. - Acquisitions or sales of marketing assets would be explicitly included in the capital account in national accounts and in the goods and services account in the balance of payments. - If the status quo is maintained: - Clearer guidance is needed on how best to record transactions related to marketing assets. - Possible options for recording franchise fee–type transactions include: - (i) record the entire amount in services (BPM6 default if a split is not possible); - (ii) record the entire amount in income; - (iii) split the recording between services and income (the flexible option in BPM6 if information is available). ### Classification and recording perspectives from the GZTT - Recording as services: - The GZTT discussed that regardless of classification, transactions related to marketing assets should be recorded as output (services) to recognize that natural resources are truly nonproduced assets whereas marketing assets are considered nonproduced because of a pragmatic choice. - Recording transactions related to payments for the use of marketing assets as services is described as the conceptually correct approach (i.e., recorded in services recognizing the fact that if compilers had the source data to record marketing assets as produced, then they would). - This approach clarifies current practice where marketing assets are considered nonproduced, GFCF is not recorded for creation, but transactions related to the assets are typically recorded as output (services). - Alternative viewpoints and flexibility - Some GZTT members argued for recording the entire transaction as property income. - Split views on flexibility for compilers to record portions as output (services) or property income: - Some members prioritized consistency across countries. - Others favored flexibility to allow for the most accurate recording. - If it is not possible to divide the transaction into service and property income elements, compilers may choose either to record the whole fee as the payment for a service, or to record the whole fee as property income, based on the characteristics of the transaction. ### Expanding income categories and subcategorization - Proposal: expand the definition of property income to include a subcategory for payments for nonproduced non-financial assets other than natural resources. - Proposal detail: Rent could be subcategorized into: - rent on natural resources, and - rent on other nonproduced nonfinancial assets. - Goodwill and marketing assets - The GZTT favored introducing a specific subcategory for goodwill and marketing assets to enable recording transactions involving separately identifiable marketing assets. ### Sublicensing, economic ownership, and practical recording rules - Sublicensing where economic ownership is transferred should be recorded as the sale of part of the original, to avoid double counting. - A decision on transfer of economic ownership would follow existing guidelines in the SNA. - Transactions related to marketing assets between units in the same MNE (for example, global royalties flowing to a unit in a country with a favourable tax system) were raised; Annex III outlines two real world transactions in marketing assets. Consideration of this point is undertaken in the guidance note on the issue of economic ownership of IPP assets (G.5). ### Practical aspects and lessons from R&D capitalization - Practical testing: - The practical aspects of proposed options will be tested by way of global consultation, a way-forward unanimously supported by the AEG and the Committee. - Lessons from R&D capitalization: - R&D statistics benefited from being deeply embedded in the broader statistical system before capitalization. - It is important to consider how capitalization would further explain the role of associated capital services in value chains and production processes. ### Questions posed for consultation and discussion - 1) Do you consider that, on a conceptual basis, marketing assets meet the 2008 SNA and BPM6 definitions of produced assets? - 2) If marketing assets are produced (i.e., option 1 is preferred), do you favor: - (i) creating a new subcategory of produced assets within intellectual property products for marketing assets? - (ii) the recommended treatment of sublicensing marketing assets as a type of license to reproduce; thus, for those licenses that satisfy the asset requirement, treat as a sale of part or whole of the original to the unit holding the license to reproduce? - 3) If marketing assets are treated as nonproduced (i.e., no change in the standards, Option 2), should transactions related to marketing assets be recorded: - a. by splitting them between services and income (the flexible option in BPM6, if information is available); - b. in services (the default solution in BPM6, if a split is not possible); - c. in income? - 4) If marketing assets should continue being treated as nonproduced, do you consider that the definition of property income should be expanded to include a subcategory for payments for nonproduced non-financial assets other than natural resources? ### Annex highlights — business accounting and examples - IAS 38 identifies marketing rights, trademarks, and trade dress as examples of intangible assets; advertising and promotional activities are specifically identified as costs that should be expensed and not capitalized in IAS 38. - Franchising example (McDonald’s): - According to the 2019 annual report, 93 percent of the restaurants within the McDonald’s Corporation are franchised, and franchise fees account for roughly 55 percent of the corporation’s revenues. - Franchise fees may cover benefits of using the McDonald’s brand name and trademark (classified as goodwill and marketing assets) and include advertising, management, and oversight services that look like services under the SNA. - Compilers may split franchise fees into services (advertising and management services) and property income (use of marketing assets) based on source information or using a model or assumption; this is the current approach as alluded to in BPM6, paragraph 10.140. - Trademarks in an MNE example: - Trademarks can be held by one group unit which charges royalty fees to other units for use of the trademark. - Where the trademark is held by a SPE, it is difficult to argue that there is a service element to the fees; the entire fee looks to be payment for the trademark, a non-produced asset. *Source: GZTT discussion and recommendations on payments for nonproduced knowledge-based capital — marketing assets (sections and annexes).* ### SECTION I: INTRODUCTION TO THE ISSUE ### g9-payments-for-nonproduced-knowledgebased-capital-marketing-assets - SECTION I: INTRODUCTION TO THE ISSUE ### Background - Marketing assets (examples: brand names, logos, trademarks, mastheads, domain names) are an important part of the modern global economy and can add significant value when added to a good or service. - Firms expend resources to differentiate products and generate brand value; marketing assets play a key part in global value chains and, because of their intangible nature, play a part in efforts to shift profits within multinational enterprise groups. - Both the System of National Accounts, 2008 (2008 SNA) and the Balance of Payments and International Investment Position Manual, sixth edition (BPM6) classify marketing assets as nonproduced non-financial assets. - Nonproduced non-financial assets are distinguished by coming into existence in ways other than through processes of production and are classified into three categories: (i) Natural resources; (ii) Contracts, leases, and licenses; and (iii) Goodwill and marketing assets (2008 SNA paragraph 10.164). - There is a conceptual tension: marketing assets often appear to satisfy SNA criteria for produced assets because corporations deliberately create them through investments and spending under direct management and control, and the assets are used repeatedly in production to identify and differentiate products and establish price and market share. ### Issues for discussion - The Guidance Note examines whether marketing assets should remain classified as nonproduced non-financial assets or be re-examined as produced non-financial assets, noting that the classification determines how related transactions are recorded in national accounts and the balance of payments. - Four broad types of transactions involving marketing assets are identified: - (i) payments for the use of a marketing asset (franchise fee), which do not involve transfer of economic ownership but give rights to use under set conditions; - (ii) outright acquisition/sale of a marketing asset, entailing transfer of economic ownership of the underlying asset; - (iii) payments to sub-license a marketing asset, which can be considered a license to reproduce and may qualify as an asset if it satisfies the asset requirements; - (iv) creation of a marketing asset, which if considered produced needs recording in the capital account as gross fixed capital formation. ### Existing material - BPM6 paragraph 13.17 and 2008 SNA paragraph 10.198 list items such as brand names, mastheads, trademarks, logos, and domain names as marketing assets. - The 2008 SNA states a brand may be more than a corporate name or logo and can encompass characteristics of goodwill such as customer loyalty. - The 2008 SNA recognizes marketing as a key driver of brand value and that corporations invest to build and support brands, yet does not identify marketing assets as produced fixed assets primarily because their value is difficult to measure (paragraph A4.53). - Limited internationally coordinated research since the last SNA update: - Research by Statistics Netherlands in 2008 included brand equity and showed capitalization of certain advertising expenses is an option. - Corrado, Hulten, and Sichel (2005 & 2009) have included marketing assets as capital formation in U.S. analyses. - International Accounting Standards (IAS 38) treat marketing assets similarly to 2008 SNA: only assets acquired separately that meet recognition requirements may be recognized; internally generated marketing assets are indistinguishable from costs of developing a business and should be expensed. ### Options considered - The Guidance Note examines two proposed options and necessary updates to 2008 SNA and BPM6. Option I: Marketing assets are treated as produced non-financial assets - Conceptual change: - Marketing assets would be included in the list of fixed assets in SNA under the category of intellectual property products (IPP), with a new sub-category for marketing assets; the current nonproduced asset category of goodwill and marketing assets would become solely goodwill. - Payments for the Use of a Marketing Asset (Franchise Fee) - If marketing assets are produced, no element of property income would exist in franchise fee payments; the entire franchise fee would be recorded as output in the form of the sale of a service. - BPM6 would need updating to remove advice in paragraph 10.140 to, where possible, record a portion of the transaction as primary income; BPM6 paragraph 13.13 already states payments for temporary rights to use or reproduce IPP are recorded as a service and marketing assets would fall under this. - Outright Acquisition/Sale of a Marketing Asset - Outright acquisition or sale would be recorded in national accounts capital account under gross fixed capital formation, with value equal to purchase/sale price. - Consumption of fixed capital would require estimation for marketing assets despite absence of physical wear and tear; parameters (life expectancy, depreciation profile) may differ across industries and sectors (example: technology sector assets may depreciate quicker than automobile industry assets). - In the balance of payments, acquisition/sale would be recorded in the goods and services accounts; item breakdowns would need expansion to include a category for marketing assets, likely under other business services. - Sub-Licensing a Marketing Asset - Payments to sub-license can be considered a license to reproduce and may qualify as an asset if it satisfies asset requirements; if a license allows reproduction and transfer of distribution/support responsibility, it should be regarded as the sale of part or whole of the original. - Creation of a Marketing Asset - Creation would be recorded in the capital account as gross fixed capital formation; for assets created within a firm, valuation could follow the approach for own-account R&D, valuing on the basis of costs of production. Option II: Marketing assets are maintained as nonproduced non-financial assets - Need for consistent guidance: - If maintained as nonproduced, consistent guidance is recommended in SNA and BPM because current 2008 SNA and BPM6 lack full consistent guidance on recording marketing-asset-related transactions and are short on clear recommendations for nonproduced non-financial assets other than natural resources. - Payments for the Use of a Marketing Asset (Franchise Fee) - 2008 SNA does not give specific advice on recording franchise fees; BPM6 paragraph 10.140 advises that franchise fees and trademark revenue include aspects of property income as well as services and that, in principle, splitting income and service elements is desirable but may not be feasible; conventionally the entire values are classified as charges for the use of intellectual property unless additional information allows a split. - Implementing a split raises the issue of how property income earned on marketing assets should be recorded under current SNA: 2008 SNA paragraph 7.107 states property income accrues when owners of financial assets and natural resources put them at the disposal of other units; marketing assets are not financial assets and are excluded from natural resources, so they do not give rise to investment income or rent under current definitions (paragraphs 7.107–7.109 and 10.15). - BPM6 similarly offers no specific recording option for property income related to marketing assets; absence of a further category within property income prevents recording payments for use of marketing assets as property income under current frameworks. - The possibility exists to record the entire franchise fee as property income where there is no element of a service being provided; BPM6 currently defaults to recording the whole transaction as charges for the use of intellectual property if a split cannot be made. - Outright Acquisition/Sale of a Marketing Asset - Market transactions in marketing assets are recorded in the capital account as acquisition/disposal of a nonproduced asset; 2008 SNA paragraphs 10.196–10.199 recognize difficulties in identifying pure sales of marketing assets, as most transactions involve entire units where marketing assets are embedded. - When sold individually and separately, the transaction is recorded as a transaction in goodwill and marketing assets; given interest, it may be desirable to include a subcategory to goodwill and marketing assets so separately identifiable marketing-asset transactions can be recorded. - In the balance of payments, such transactions are recorded in the capital account as acquisition and disposal of nonproduced non-financial assets between residents and nonresidents. - Sub-Licensing a Marketing Asset - Sub-licensing would be treated as acquisition/sale of part or whole of the nonproduced marketing asset to the licensee; the license is considered an asset and recorded as a transaction in nonproduced assets in the capital account. - Creation of a Marketing Asset - If nonproduced, marketing assets are not brought into existence via production; creation requires no specific recording and related costs are recorded as intermediate consumption and wages for the producing activity (continuation of current practice). ### Recommended approach—conceptual aspects - Conceptual view: - The AEG and Committee members considered marketing assets to be produced assets, but concerns exist about practical feasibility of reclassification; many members thought paragraph A4.53 in the 2008 SNA remains relevant (difficulty of measurement). - The AEG and Committee agreed with the GZTT proposal to obtain countries’ views via a global consultation on feasibility of recording marketing assets as produced non-financial assets. - If global consultation endorses produced classification: - The intellectual property products category needs expansion with a new subcategory to separately identify marketing assets within IPP. - BPM6 paragraph 10.140 would be updated to reflect that marketing assets are produced assets and that payments for use are treated as services. - Acquisitions or sales of marketing assets would be explicitly included in the capital account in national accounts and in the goods and services account in the balance of payments. - If the status quo is maintained: - Clearer guidance is needed on how best to record transactions related to marketing assets. - The GZTT did not reach consensus on best recording practice if marketing assets remain nonproduced; possible options for recording franchise fee–type transactions include: - (i) record the entire amount in services (BPM6 default if a split is not possible); - (ii) record the entire amount in income; - (iii) split the recording between services and income (the flexible option in BPM6 if information is available). *Guidance Note prepared by Joseph Haynes (Statistics Netherlands, primary drafter), Natalia Kuprianova (Central Bank of Russia), Thomas Alexander (IMF); the Guidance Note benefitted from comments by Ms. Jennifer Ribarsky (GZTT Secretariat, IMF); work undertaken under the supervision of Michael Connolly and Branko Vitas (co-Chairs of the Task Team).* ### 32. The GZTT discussed the possibility that regardless of the classification of marketing ### Payments for Nonproduced Knowledge-Based Capital — Marketing Assets ### Classification and recording of marketing assets - The GZTT discussed that regardless of whether marketing assets are classified as produced or nonproduced, transactions related to them should be recorded as output (services) to recognize that natural resources are truly nonproduced assets whereas marketing assets are considered nonproduced because of a pragmatic choice. - Recording transactions related to payments for the use of marketing assets as services is described as the conceptually correct approach (i.e., recorded in services recognizing the fact that if compilers had the source data to record marketing assets as produced, then they would). - This approach would clarify the current practice where marketing assets are considered nonproduced, GFCF is not recorded for the creation of the marketing asset, but transactions related to the assets are typically recorded as output (services). ### Alternative viewpoints and flexibility in recording - Some GZTT members argued for recording the entire transaction as property income. - There were split views on how much flexibility compilers should have in recording transactions or portions thereof as output (services) or property income: - Some members prioritized consistency across countries. - Others favored flexibility to allow for the most accurate recording. - If it is not possible to divide the transaction into service and property income elements, compilers may choose either: - to record the whole fee as the payment for a service, or - to record the whole fee as property income, based on the characteristics of the transaction under discussion. ### Expanding property income categories and subcategorization - Many GZTT, AEG, and Committee members considered expanding the definition of property income to include a subcategory for payments for nonproduced non-financial assets other than natural resources. - Proposal: Rent could be subcategorized into: - rent on natural resources, and - rent on other nonproduced nonfinancial assets. ### Goodwill and marketing assets as a specific subcategory - The GZTT favored introducing a specific subcategory for goodwill and marketing assets to enable recording transactions involving separately identifiable marketing assets. ### Treatment of sublicensing and economic ownership - Sublicensing where economic ownership is transferred should be recorded as the sale of part of the original, to avoid double counting. - A decision on transfer of economic ownership would follow existing guidelines in the SNA. - Transactions related to marketing assets between units in the same MNE (for example, global royalties flowing to a unit in a country with a favourable tax system) were raised; Annex III outlines two real world transactions in marketing assets. Consideration of this point is undertaken in the guidance note on the issue of economic ownership of IPP assets (G.5). ### Practical aspects and lessons from R&D capitalization - The practical aspects of proposed options will be tested by way of global consultation, a way-forward unanimously supported by the AEG and the Committee. - A decision to capitalise marketing assets should learn lessons from the capitalization of R&D in the 2008 SNA and BPM6: - R&D statistics benefited from being deeply embedded in the broader statistical system before capitalization. - It is important to consider how capitalization would further explain the role of associated capital services in value chains and production processes. ### Questions for discussion (as posed by the GZTT) 1) Do you consider that, on a conceptual basis, marketing assets meet the 2008 SNA and BPM6 definitions of produced assets? 2) If marketing assets are produced (i.e., option 1 is preferred), do you favor: - (i) creating a new subcategory of produced assets within intellectual property products for marketing assets? - (ii) the recommended treatment of sublicensing marketing assets as a type of license to reproduce; thus, for those licenses that satisfy the asset requirement, treat as a sale of part or whole of the original to the unit holding the license to reproduce? 3) If marketing assets are treated as nonproduced (i.e., no change in the standards, Option 2), should transactions related to marketing assets be recorded: - a. by splitting them between services and income (the flexible option in BPM6, if information is available); - b. in services (the default solution in BPM6, if a split is not possible); - c. in income? 4) If marketing assets should continue being treated as nonproduced, do you consider that the definition of property income should be expanded to include a subcategory for payments for nonproduced non-financial assets other than natural resources? ### Annex highlights — business accounting and examples - IAS 38 identifies marketing rights, trademarks, and trade dress as examples of intangible assets; advertising and promotional activities are specifically identified as costs that should be expensed and not capitalized in IAS 38. - Example: Franchising of a fast-food restaurant (McDonald’s): - According to the 2019 annual report, 93 percent of the restaurants within the McDonald’s Corporation are franchised, and franchise fees account for roughly 55 percent of the corporation’s revenues. - Franchise fees may cover benefits of using the McDonald’s brand name and trademark (classified as goodwill and marketing assets) and include advertising, management, and oversight services that look like services under the SNA. - Compilers may split franchise fees into services (advertising and management services) and property income (use of marketing assets) based on source information or using a model or assumption; this is the current approach as alluded to in BPM6, paragraph 10.140. - Example: Trademarks in an MNE: - Trademarks can be held by one group unit which charges royalty fees to other units for use of the trademark. - Where the trademark is held by a SPE, it is difficult to argue that there is a service element to the fees; the entire fee looks to be payment for the trademark, a non-produced asset. --- _Source: https://www.imf.org/-/media/files/data/statistics/bpm6/gztt/g9-payments-for-nonproduced-knowledgebased-capital-marketing-assets.pdf_