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Saudi Arabia’s intangible assets (IAs) were valued at SAR 8.4 tn in 2023 (that’s 74% of the total market capitalization of Tadawul), according to the latest report (pdf) by the Saudi Authority for Intellectual Property (Saip). This ratio is on par with IA leaders like the US for whom IA comprises 73% of its corporate market value — but Saudi has massive concentration in just one company.
Aramco Nation: Oil giant Aramco accounts for 77% (SAR 6.5 tn) of total IAs valued at SAR 8.4 tn. Al Rajhi Banking and Investment Corporation followed at SAR 241 bn, Acwa Power Company at SAR 169 bn, and Saudi Telecoms Company at SAR 128 bn.
No surprise, then, that energy is the standout sector with SAR 6.4 tn in intangible asset value, followed by the banking industry with SAR 472 bn, and the materials sector with SAR 342 bn.
Uh, Enterprise? What’s an “intangible asset”? That’s fancy accounting-speak for a non-physical asset that has economic value to a company. Think patents, copyrights, trademarks, brand recognition, and goodwill. A tangible asset would be a building, production line, or equipment.
Sectors that have more intangible than tangible assets: Some 94% of the total assets of the software and services sector are intangible. That figure is 89% in the media and entertainment sector, 88% in the health and and retail sectors, and 86% in the transport sector.
Disclosed IAs accounted for 10% (SAR 351 bn) of the local sector’s total net assets valued at SAR 3.4 tn last year. Meanwhile, undisclosed IAs were 24x the size of disclosed IAs at SAR 7.8 tn.
What’s the difference? Disclosed IAs are those acquired from other entities and can therefore be officially recognized and separately listed on a company’s balance sheet, according to International Financial Reporting Standards (IFRS). Meanwhile, “accounting practices do not permit internally generated intangible assets to be included on the balance sheet under the standard. However, it’s important to note that undisclosed intangible assets, such as internally generated goodwill, are often more valuable than disclosed intangible assets.”
The rationale: Intangible assets like internally generated goodwill or brand reputation often lack objective, consistent valuation methods, the argument goes, so including them could mislead investors. IFRS does, however, encourage companies to disclose information about this tupe of intangible asset in notes.
REMEMBER- We’re getting serious about protecting intellectual property rights: A new unit in the attorney general’s office was announced in February 2024 with the mandate of prosecuting violations of intellectual property rights under the trademark and copyright laws. The office will investigate and explore whether to lay charges in cases referred to it by the Saudi Authority for Intellectual Property.
