As is assumed that all the brand names have

As we can observe, this ratio has been reduced during the
years, because the group has stopped investing in plant and equipment. This
happens because the firm is well-established in this sector as it has an active
role in more than 165 countries in all over the world. This practical means
that they have already created a huge productive unit, including distilleries,
warehousing functions, winery, bottling plants, sawmills, concentrate plant and
cooperages. Also, the company possesses its standard office in Louisville, and
because it wants to enforce its cash flows, the executives prefer leasing
office spaces in the rest of USA and abroad in order to fulfill its business
activities such as sales, marketing activities and administrative operations
instead of direct purchasing which would be very costly.

Concerning the intellectual properties, they include
trademarks, know-how, copyrights, patents and priority manufacturing technologies
which are powerful intangible assets of the firm and of course well-protected. However,
Brown Forman has licensed some of them to third parties, in order to enhance
its brand name and with the purpose of earning profits. When the firm obtains
another company, they first deliver the purchase price to identifiable
liabilities and assets, involving intangible trademarks and brand names, based
on assessed fair value. Also, they report as goodwill any remaining purchase
price. Intangible assets and Goodwill with indefinite lives are undeclared. It
is assumed that all the brand names have unlimited life. Once a year, all “immortal”
intangible assets for impairment and goodwill are evaluated. If an asset’s book
value is bigger than its fair value, then the fair value is written down to its
estimated fair value.

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However, the method of the valuation which follows the firm
is a big discussion. As it occurs from its financial elements, Brown Forman
uses the method of fair values. But is the right way for a big company in this
period, assessing with this method? For sure, it is a high risk nowadays due to
financial crisis because the prices of buildings, lands and equipment
continuously fall down as a result the value of whole group decrease. Perhaps,
it would be ideal a decade before, because the prices of these assets were
importantly high, and for a big firm would be a perfect investment parallel as
it would manage to develop its growth. But nowadays, this stance may be not
representative for its picture.

Adopting historical costs, the value would be
non-negotiable. They could maintain a stable value without concerning for the
prices of the market, the way of their shares, and of course keeping these
bills stable in their financial statements. Generally, companies and especially
huge companies must select more safe ways in order to survive and to develop
during the years, because if an impairment will occur, then they will have to
face huge losses. Today, there is the danger the current value of a building
compare with the purchasing price to be more less.