BRAND UNDERESTIMATION IN THE ACCOUNTING SYSTEM: EMPIRICAL ANALYSIS OF UKRAINIAN TRADING COMPANIES

Abstract

This study investigates the systematic underestimation of brand value in the accounting systems of Ukrainian retail companies and its subsequent impact on financial performance. Despite the strategic importance of brands as intangible assets, internally developed brands are often not recognized on balance sheets under IAS 38 or National Accounting Standards, causing financial statements to underrepresent their true economic contribution.
The research employs an empirical analysis of five major Ukrainian retailers–ATB-Market, Fozzy Group (Silpo), Novus, Varus, and Rozetka–using 2024 financial data. Brand value was estimated via the income-based relief-from-royalty approach, while marketing expenditures and normalized variables were analyzed to eliminate scale effects. Correlation and regression analyses, including mediation models, examined relationships between brand value, marketing intensity, and return on assets (ROA).
Results indicate that economic brand value substantially exceeds accounting-reported intangible assets across all companies, confirming systemic underestimation. Normalized analysis shows that relative brand strength positively affects ROA, whereas marketing intensity does not consistently translate into higher profitability and may exert short-term negative effects. Furthermore, intangible assets recorded in financial statements show negligible explanatory power for firm performance. These findings highlight the necessity for ratio-based metrics, improved disclosure of intangible assets, and optimized marketing investment strategies to accurately capture the economic role of brands in the retail sector.