STEP ONE is calculating how much of a company’s total sales falls under a particular brand. In some cases the brand encompasses nearly all sales, as with McDonald’s. In others it is tied to only one set of products: Louis Vuitton within LVMH Group. Using reports from analysts at JPMorgan Chase, Citigroup, and Morgan Stanly, Interbrand projects five years of sales and earnings tied to each brand’s products and services.

STEP TWO is ca1culating how much of those earnings results from the power of the brand. Interbrand strips out operating costs, taxes, and charges for the capital employed to arrive at the earnings attributable to intangible assets. Inlerbrand then estimates the brand’s effect on earnings relative to other intangible assets such as patents and management strength.

FINALLY, those future earnings are discounted to arrive at a net present value. lnterbrand discounts against current interest rates and also against the brand’s overall risk profile to factor in brand strength. Factors include market leadership, stability, and global reach-or the ability to cross both geographic and cultural borders.

The final result values the brand as a financial asset. BusinessWeek and Interbrand believe this figure comes closest to representing a brand’s true economic worth.