Valuation of Intangible Assets, Brand, Intellectual Property

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Valuation of Intangible Assets, Brand, Intellectual Property

In  this  era  of digital world corporates, are now investing more and more into intangible assets like technology, software, customers and brands, in addition to physical assets and property, plant and equipment. With lenders giving out loan against Intangible assets as a collateral, the importance of Valuation of Intangible Assets has further increased.

The importance of valuing intangible assets arises from the fact that the reported net worth of businesses may not represent its true value, which more often is in the form of intangibles. This is evident from the gap between company’s book value and market value on stock exchanges/ transaction value in M&A transaction. Also, Ind AS 38 require impairment assessment of intangibles asset on an annual basis and whenever there is an indication that the intangible asset is impaired.

KANASSURE  has the expertise to help clients estimate and assign the value to their Intangible assets using valuation approaches and methodologies which are well recognised.

Categories of Intangible Assets

  • Marketing related: Trademarks (Brands), trade names, service marks, newspaper, mastheads, internet domain names, non-competition agreements
  • Contract-based intangible assets: Licensing and royalty agreements, advertising, construction, service or supply agreements, lease agreements, franchise agreements, employment contracts.
  • Technology-based intangible assets: Patented technology, computer software, unpatented technology (know-how), databases, trade secrets such as secret formulas, processes and recipes.
  • Customer-related intangible assets: Customer lists, order or production backlogs, customer contracts and customer relationships
  • Artistic-related intangible assets: Plays, operas, ballets, books, magazines, newspapers, pictures, photographs

The concept of valuation of intellectual property and other intangible assets of a company is new as compared to other concepts of intellectual property (IP) law. The value of an IP is a monetary compensation that is expected to be received from licensing of an IP or from sale or exchange of other intangible assets. The intangible assets of a company include goodwill, trademark, brand, copyright, logos, technology, know how, trade secrets etc.

There are mainly three methods of valuation of IP.

  • Cost Based Method
  • Market Based Method
  • Economic Based Method

Impairment Studies for Intangible Assets & Goodwill

Financial reporting require impairment assessment of cash generating units (‘CGU”), intangible assets or goodwill at every accounting year end or as and when there are indications suggesting diminution in the value of an intangible asset.

Impairment Analysis provides guidance for the re-measurement of tangible assets, intangible assets or goodwill pursuant to the financial reporting requirement under Indian GAAP, IND AS, IFRS or US GAAP.

KANASSURE has expertise to perform independent impairment assessment of intangible assets and goodwill for financial reporting purposes