Intangible Assets and Valuation Premiums: Evidence from Procter & Gambles Brand (20102025)

Theemergenceof intangible assets has further increased the systematic divergence between the market and book values of firms, especially in industries that are brand intensive. Traditional accounting based on the IAS 38 expensing rules does not consider internally created brands and most R&D, leaving considerable amounts of economic valueunaccounted for.This articleanalyzesProcter&Gamble (P&G) between2010 and 2025through a single-firm longitudinal panel in order to determine the relationship between advertising (Ad Intensity) and R&D (RD Intensity) with the valuation measures such as price to book (P/B) and Tobins Q and how a simple adjustment to capitalizing R&D changes the reported ratios.The average advertising intensity is 10.8 percent, and the average R&D intensity is 2.6 percent with mean P/B = 5.23 and mean Q = 2.44.It is found that Ad Intensity and P/B are moderatelynegativelycorrelated (r = -0.62),whereasR&D associations are weaker (r = -0.19).An increase in R&D investment over a three-year periodcuts average P/B by 3.8 and smooths ROA fluctuations. The evidenceindicatesthat accountingconservatismis at least one reason behind the valuation premium of P&G, and the brand equity and other unrecorded intangibles continue to play a key role in the investment decision-making of investors,analysts,andstandard setters.