In 1996, Financial World magazine estimated and ranked the most valuable brand names in the world. Number 11 in the ranking was Gillette with an estimated value of $10.3 billion. Financial World explained its brand value estimation process for Gillette as follows: Estimate the amount of assets used in generating the brand sales. This estimation involves using industry sales-to-asset ratios. For Gillette, Financial World estimated that 1995 sales of $2.6 billion required the use of $988 million in assets. Compute excess return on assets. Financial World assumes that a generic brand name will generate a return on assets of 5%. Gillette’s 1995 operating profit of $961 million exceeds this 5% return by $912 million [$961 million – ($988 million assets x 0.05)]. Estimate after-tax return. Financial World puts Gillette’s tax rate at 37%, yielding an after-tax excess return of $575 million [$912 million x (1 – 0.37)]. Multiply the after-tax excess return by the brand’s strength multiple. The strength multiple takes into account the brand’s leadership, stability, market size, internationality, trend, and legal protection. Financial World placed Gillette’s strength multiple at 17.9 (quite high). This yields the final estimate of the brand value: $10.3 billion ($575 million excess after-tax return x 17.9). Comment on the relevance and reliability of the $10.3 billion Gillette brand value calculated by Financial World. Under what circumstances would you be willing to recognize this value in the financial statements?