The importance of intangible assets is growing in modern society’s business operations. This is because more and more newly created values are developed through knowledge rather than material resources and labor in production.
We provide intangible asset valuation services in accordance with IVS Valuation Standards and the Methodology Regulation for Asset Valuation.
Intangible investments or intangible assets such as brands/trademarks, patents, licenses, goodwill, etc., can be assessed using the following valuation approaches:
- Cost approach
- Market approach
- Income approach
The cost approach is based on the principle of substitution, assuming that a rational buyer will not pay more for a specific asset than it would cost to obtain an asset with the same utility value as the assessed asset.
The market approach relies on direct comparisons of sales prices and/or offered prices in the market for assets with similar characteristics or comparing the market value of a business entity with the market value of comparable business entities.
The income approach to valuation is based on the principle of anticipation. According to this principle, a typical investor/buyer in the market will invest only in assets/capital from which they expect future inflows or benefits.
Before deciding which valuation method is applicable for a specific intangible asset under assessment, authorized appraisers consider the following:
- the definition of an intangible asset in accordance with the law and international standards, and whether the subject asset meets the criteria for identifying and recognizing an intangible asset (separability or arising from contractual or other legal rights, the ability to control, i.e., derive benefits from the subject asset);
- if the valuation is for financial reporting purposes, it must comply with International Accounting Standard 38 – Intangible Assets.
- the category to which the intangible asset belongs, as well as the methodology prescribed for the category to which the intangible asset belongs:
-category of marketing-related intangible assets;
-category of customer-related intangible assets;
-category of contract-based intangible assets;
-category of technological intangible assets, or
-category of art-related intangible assets.
- the useful life of the intangible asset and whether the subject intangible asset has a limited or unlimited lifespan;
- all rights, privileges, or conditions related to the intangible asset under assessment;
- whether there are available trading data for the same or similar intangible assets;
- future economic benefits (revenue or cost savings) that the owner can derive from the specific intangible asset and the risk or probability of realizing such future economic benefits based on control or ownership of that intangible asset;
- information on the acquisition or creation costs of the intangible asset, and so on.