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Setting the Standards: Advances and Challenges in IP Valuation


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Setting the Standards: Advances and Challenges in IP Valuation

  1. 1. Setting the Standards: Advances and Challenges in IP Valuation Presented by: Weston Anson CONSOR Intellectual Asset Management 800.454.9091
  2. 2. The Challenges Accurately valuing your company’s most valuable assets when: Methodologies are in flux Different standards are being set by different groups And, IP and intangible asset values constantly change
  3. 3. The Advances are Real New standards for accounting and business combinations Regular tests for impairment AICPA and USPAP standards General agreement on three main valuation methodologies: Cost, Income, Market Comparables
  4. 4. Many Challenges Remain How does one define value for a piece of IP or an intangible asset? Can there be a single set of standards? Can a single methodology ever work best? Can an accountant ever learn to actually value IP or intangible assets?
  5. 5. IP Can Have Multiple Values Simultaneously: And They Can All Be Correct!! Example - A fully developed patent: Value to owner if commercialized: $100m Value to owner if held defensively: $ 50m Value to competition: $ 50m Value to infringer: $ 25m
  6. 6. Therefore, CONTEXT Determines IP Value Litigation Sale Bankruptcy Divorce Value to whom, and why: Tax Defense Commercialization License / cross license
  7. 7. Why Accountants Can’t Measure IP Value Accountants track past transactions with outside parties Financial statements report on historical data This makes accounting inherently backward-looking Two significant limitations result: Accounting doesn’t value IP that is internally generated Accountants are ill-equipped to estimate future value of IP and intangible assets
  8. 8. Jurisdictional Alphabet Soup Cross-border transactions pose valuation issues when different standards are recognized Therefore, geography (along with time) becomes another contextual valuation issue IVSC, AICPA, IFRS, NACVA, USPAP, IACVA, etc. are all setting valuation standards Notably, none of these groups are intellectual property based organizations
  9. 9. Advancing Our IP Infrastructure Until now! The new LESI Valuation Standards Committee Adopt valuation standards that have the input of IP professionals, not just accountants Value all IP, not just acquired IP Concentrate first on bringing uniformity to the five key IP geographies: EU, US, China, Japan, Korea