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stuart.whitwell@intangiblebusiness.com

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thayne.forbes@intangiblebusiness.com

Paul Cliff
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Intangible Asset Valuation

In practice intangible assets can refer to different things, but are generally used to mean economic assets which do not have physical substance or form, or are not tangible. Intangible assets include brands, goodwill, customer relationships, software and intellectual property related rights. We have compiled on this website a list of intangible assets.

Intangible asset valuations are used, in particular,  in accounting practice to recognise assets on business combinations at fair values, which is aimed at improving acquisition accounting transparency. For example, intangible asset valuations can be required for International Financial Reporting Standard 3 (IFRS 3) on business combinations and International Accounting Standard 38 (IAS 38) on intangible assets. There are equivalent US accounting standards, but the accounting provisions are not the same in all respects.

Widely adopted intangible asset valuation approaches

When carrying out an intangible asset valuation, Intangible Business adopts widely accepted approaches based on a combination of the income, market and cost approaches. These approaches have much in common with those used for brand valuation, business valuation, and intellectual property valuation.

The income approach uses estimates of future estimated economic benefits or cash flows and discounts them, for the associated time and risks involved, to a present value.

The market approach uses market based indicators of value. For intangible assets this can be transactions involving selling, buying, franchising or licensing intangible assets, which are often in practice bundled with other deals.

There are two general considerations to the cost approach: the historic cost of creating the intangible asset and the estimated cost and time that would be required to create an equivalent or replacement intangible asset.

Focus of Intangible Business

The application of these approaches benefits from Intangible Business’s specific focus on forecasts, with research and analysis of market transactions for different but comparable assets where relevant information is difficult to obtain. Intangible Business adopts a thorough approach based on good knowledge and experience of how to find, analyse and present information in a way which better informs an intangible asset valuation.

Intangible Business also ensures that the approaches used, and conclusions reached, are commercially balanced, realistic and consistent with analyses required for all the different reasons intangible asset valuations are required and carried out in practice.

Support to financial reporting

If intangible asset value is at stake, it will be a significant issue. Intangible Business is experienced in providing expert independent intangible asset valuation services for management, owners and their legal or other advisers in particular for: financial reporting; dispute resolution; corporate deals; IP management; and supporting other accounting requirements.