ACCA Strategic Business Reporting (SBR) Practice Exam

What must an entity consider when determining the useful life of its brand?

1. The profitability of the brand in the last year

2. The potential for brand expansion and market saturation

3. The likelihood of technological obsolescence

4. The extent to which the brand has long-term potential

The correct answer is: The extent to which the brand has long-term potential

When determining the useful life of its brand, an entity must carefully evaluate the extent to which the brand has long-term potential. This consideration encompasses a thorough analysis of various factors such as market trends, customer loyalty, and the brand's position within the competitive landscape. A brand with strong long-term potential is likely to maintain relevance, adapt to changes in consumer preferences, and remain competitive, which justifies a longer useful life. In evaluating long-term potential, the entity should also reflect on how well the brand might resonate with future markets and demographic shifts, as well as its ability to withstand economic fluctuations. This holistic view allows the entity to project the brand’s sustainability and ongoing contribution to revenues over an extended period. Other factors, while relevant in broader contexts, do not encapsulate the essential characteristics of long-term brand potential as comprehensively. For example, solely focusing on profitability in the last year offers a limited perspective and may not account for future brand viability or market changes. Similarly, considerations related to brand expansion and market saturation or the possibility of technological obsolescence serve to inform the broader context but do not specifically address the enduring strength and adaptability of the brand itself in a long-term framework.