INTANGIBLE ASSETS - VALUATION AND ITS - PPT.pptx

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INTANGIBLE ASSETS - VALUATION AND ITS
MANAGEMENT

Intellectual Property Right(IPR) –
Understanding & Practice
Part I : Intangible Assets
Part II : Intellectual
property rights
Part III : ITA Vs IPR
Part IV : Disclosures
Part V : Valuation- Approaches
and Methodologies
Part VI : Legal Provisions
& Case Studies
Part VII : Role of CS
6

NAME THE MOST POPULAR
ACQUISITION OF AN APP IN
COMMERCIAL AND BRANDING
SENSE???
9

YES. ITS NONE OTHER THAN
WHAT’S APP by FB

What is the cost of
Acquisition???
YES $ 19 billions
11

What’s the development cost of
whatsapp???
12
12

Number of Employees @ Whats App???
14
15

WHAT MAKES THE COMPANY TO
HAVE THAT MUCH OF VALUE ???
THAT’S THE POWER OF
VALUATION OF INTANGIBLE
ASSETS
16

SO FRIENDS,
EVERYONE ARE EXCITED TO KNOW ABOUT IA’s
18

KYI-
(Know Your Intangible Assets Knowledge)
ROUND -I
19

Get..
Set…
Go….
With
IPR
20

Maximum marks for each right
answer (1M)
For each wrong answer (0.5M)
negative mark
PART-A- Multiple choice questions
Know your IA’s
Knowledge(KYI)
21

1. What is IPR?
(a). Artificial Intelligence
(b). Over the Creations of the persons minds
(c). Goodwill
(d). Natural Intelligence
23

 Intellectual property rights are the rights
given to persons over the creations of their
minds. They usually give the creator an
exclusive right over the use of his/her
creation for a certain period of time.
WHAT IS IPR??
25

1. What is IPR?
(a). Artificial Intelligence
(b). Over the Creations of the persons minds
(c). Goodwill
(d). Natural Intelligence
The Correct Option is (b).
27

2. Which of the following is not an IPR?
(a). Copy rights and Trade marks
(b). Designs
(c). Incubators and accelerators
(d). Trade Secret and Database
28

Types of Intellectual Property Rights
29

Let’s have look with the Answer!!
31

2. Which of the following is not an IPR?
(a). Copy rights and Trade marks
(b). Designs
(c). Incubators and accelerators
(d). Trade Secret and Database
The Correct Option is (C).
32

3. What is intangible asset?
(A). Identifiable non-monetary asset
(B). Identifiable monetary asset
(C). Non-performing asset
(D). Contingent asset
33

What is Intangible Assets??
34

36
Intangible Assets
An intangible asset is an identifiable non-
monetary asset without physical
substance. Such an asset is identifiable
when it is separable, or when it arises
from contractual or other legal rights.
Which Cannot be visible with naked eye
36

Intangible Assets
Noncurrent assets
without physical
substance.
Useful life is
often difficult
to determine.
Usually acquired
for operational
use.
Often provide
exclusive rights
or privileges.
Intangible
Assets
37

What is an Intangible Asset?
38

3. WHAT IS INTANGIBLE ASSET?
(a). IDENTIFIABLE NON-MONETARY ASSET
(b). IDENTIFIABLE MONETARY ASSET
(c). NON-PERFORMING ASSET
(d). CONTINGENT ASSET
Now, the Correct answer is Option (a).
40

4. Which of the following is not an Intangible
asset?
(a). Market share and marketing right
(b). Franchise
(c). Customer supplier relationships
(d). lease agreement
41

The main types of intangible assets are goodwill, brand equity, Intellectual properties
(Trade Secrets, Patents, Trademark and Copyrights), licensing, Customer lists, and R&D.
TYPES OF INTANGIBLE ASSETS
4343

Types of Intangible Assets
Intangible assets are those noncurrent economic resources that a company
uses in its operations but have no physical existence.
Patents Goodwill & Copyrights Trademark
44

45
Intangible- Types
Trade mark
Copyright
Patent
Brand
Legal Goodwill
Customer List
Customer Loyalty
In house Intellect
Business
45

Examples:
☺ Licenses
☺ Intellectual property rights
☺ Brand names, publishing titles
☺ Computer software
☺ Patents, copy rights
☺ Motion picture licenses
☺ Customers lists
☺ Franchises
☺ Mortgage services rights
☺ Import quotas
☺ Customer supplier relationships
☺ Customer loyalty
☺ Market share and marketing right
☺ Goodwill
Examples of Intangibles
46

4. Which of the following is not an Intangible
asset?
(a). Market share and marketing right
(b). Franchise
(c). Customer supplier relationships
(d). lease agreement
Now the Correct Option is (d)
48

Let’s Understand Intangible assets in a
Fun way!!!
49

5. What is the relationship between ITA & IPR??
(a). IPR is an umbrella term for a set of intangible
assets or assets that are not physical in nature.
(b). IA & IPR have physical existence
(c). An intangible asset & IPR is a physical asset that
a company or person owns.
(d). IA does not physical existence but IPR have
physical existence.
50

What is the difference between
IPR Vs ITA
51

IPR VS INTANGIBLE ASSETS
S.No. Description Intangible Assets Intellectual Property Rights
1. Definition Assets that lack physical substance
and have value, such as goodwill,
patents, trademarks, copyrights, and
trade secrets.
Legal rights protecting
creations of the mind,
including inventions, artistic
works, and symbols.
2. Nature Broad category that encompasses a
range of intangible assets that do not
have any physical existence.
A subset of intangible assets
that provides legal protection
for the intangible assets
created by an individual or a
company.
3. Examples Goodwill, brand recognition,
customer relationships, non-compete
agreements, and proprietary
technology.
Patents, trademarks,
copyrights, trade secrets,
industrial designs, and
geographical indications.
4. Purpose Enhances the value of a company,
contributes to its long-term success,
and differentiates it from its
competitors.
Provides exclusive rights to the
creators or owners of
intellectual property, which
they can use to commercialize
their creations or prevent
others from using them
without their permission.
54

IPR VS INTANGIBLE ASSETS
S.No. Description Intangible Assets Intellectual Property Rights
5. Valuation Difficult to measure accurately due to
their intangible nature and
dependence on subjective factors
such as brand recognition and
reputation.
Easier to measure, as they have
specific legal frameworks
governing their creation,
ownership, and use. They can
also be assigned a monetary
value based on market
demand, licensing fees, and
potential revenue streams.
6. 6. Duration Generally, the value of intangible
assets is expected to decline over
time.
The duration of intellectual
property rights depends on the
type of right granted. For
example, patents typically last
for 20 years, while trademarks
can last indefinitely if they
continue to be used and
protected."
55

5. What is the relationship between ITA & IPR??
(a). IPR is an umbrella term for a set of intangible assets or assets
that are not physical in nature.
(b). IA & IPR have physical existence
(c). An intangible asset & IPR is a physical asset that a company
or person owns.
(d). IA does not physical existence but IPR have physical
existence.
The Correct Option is (a).
57

6. What are the Authorities not Connected with
INTANGIBLE ASSETS??
(a). Geographical Indications Law Tribunal
(b). Regional Director, Ministry of Corporate
Affairs
(c). Intellectual Property Appellate Tribunal
(d). The Intellectual Property Appellate Board
(IPAB)
58

What are the Authorities Connected
with INTANGIBLE ASSETS??
59

 Registrar of Trademark, Copyright &
Patent
 Trademark Tribunal Board
 Intellectual Property Appellate Tribunal
 Registrar of Companies, Ministry of
Corporate Affairs.
 Regional Director, Ministry of Corporate
Affairs
60
AUTHORITIES ….
60

6. What are the Authorities not Connected with INTANGIBLE
ASSETS??
(a). Geographical Indications Law Tribunal
(b). Regional Director, Ministry of Corporate Affairs
(c). Intellectual Property Appellate Tribunal
(d). The Intellectual Property Appellate Board (IPAB)
The Correct Option is (a).
62

7. Who can do Valuation of IPRs?
(i). Merchant Banker
(ii). Registered Valuer
(iii). A licensee duly authorized by the owner of the intellectual property.
(iv). None of the above
(a) (i) only
(b) (ii) and (iii) only
(c) (i) and (ii) only
(d) (i) (ii) & (iii)
63

By whom the Valuation can be
Done??
64
64

The valuation of INTANGIBLE ASSETS’s will
be done by the Registered Valuer appointed
under the provisions of the Companies Act,
2013
 By Merchant Bankers
65
VALUATION ....
65

66

7. Who can do Valuation of IPRs?
(i). Merchant Banker
(ii). Registered Valuer
(iii). A licensee duly authorized by the owner of the intellectual property.
(iv). None of the above
(a) (i) only
(d) (i) (ii) & (iii)
The Correct Option is (c).
67

8. Where the Intangible assets need to be disclosed?
(i) Annual Returns
(ii) Books of Accounts
(iii) Cash Flow Statement
(iv) Boards Report
(a) (i) only
(d) (i), (ii), (iii) and (iv)
68

DISCLOSURE
IS INTAGIBLE ASSEETS Required to
be disclosed as per the law? If so
where?
69

 Books of Accounts
 Financial Statements
 Board’s Report
 Notes to accounts
70
DISCLOSURE
70

71
DISCLOSURE IN BOARD’s REPORT
71

 The books of Accounts shall be
maintained as per the Schedule III of the
Companies Act, 2013 and Intangible Assets
shall be disclosed in the Assets
classification
72
BOOKS OF ACCOUNTS….
72

IPR IN THE PRE-DOMINANT SECTORS?
73

Sector Intangible Assets Total Assets %
Pharma 22,601 491,163 4.60%
Automotive 182,612 2,424,798 7.53%
Power 42,490 4,106,981 1.03%
Media 11,876 134,902 8.80%
Banking - 26,585,316 0.00%
Telecom 980,636 3,110,090 31.53%
Oil and Gas 367,764 8,014,213 4.59%
Total 1,607,978 44,867,462 3.58%
Disclosure of Intangible Assets in Balance Sheet 2011-12 of 7 Sectors
based on top 5 companies in each sector
74
Disclosure of Intangible Assets
74

Phar
ma
Auto
motiv
e
Power Media
Banki
ng
Telec
om
Oil
and
Gas
% 4.60% 7.53% 1.03% 8.80% 0.00% 31.53 4.59%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
%
Intangible as a % of Total Assets
75

76

8. Where the Intangible assets need to be disclosed?
(i) Annual Returns
(ii) Books of Accounts
(iii) Cash Flow Statement
(iv) Boards Report
(a) (i) only
(d) (i), (ii), (iii) and (iv)
The Correct Option is (d).
77

PART-B-Paragraph question(5M)
• Mention any 5 instances which are referred
in the companies act 2013 as well as in the
companies act 1956 (each answer carries 1M)
78

INSTANCES OF IPR- REFERRED UNDER COMPANIES ACT,
2013
79
SEECTION PARTICULAR
S
GIST OF PROVISION
6 Section 6 of
companies
act 2013 Sub
section 3 (ii)-
Explanation
For the purposes of these rules the term "same
network" includes the firms operating or functioning,
hitherto or in future, under the same brand name, trade
name or common control.
Note: 1. Individual auditor shall include other individuals
or firms whose name or trade mark or brand is used by
such individual, if any.
Note:2. Audit Firm shall include other firms whose name
or trade mark or brand is used by the firm or any of its
partners.

2013
80
SEECTION PARTICULAR
S
GIST OF PROVISION
8 Section 8 of
companies
act 2013-
Names which
resemble too
nearly with
name of
existing
company-J.
Illustrations-I
& company-
K.
Illustrations-
III
(l) addition, deletion, or modification of numerals or
expressions denoting numerals in an existing name,
unless the numeral represents any brand;
One 11 Power Equipment Ltd is not the same as One
Power Equipment Ltd, if One 11 represents a brand:

2013
81
SEECTION PARTICULAR
S
GIST OF PROVISION
16 Rectification
of Name
Section 16 on an application by a registered proprietor
of a trade mark that the name is identical with or too
nearly resembles to a registered trade mark of such
proprietor under the Trade Marks Act, 1999, made to
the Central Government within three years of
incorporation or registration or change of name of the
company, whether under this Act or any previous
company law, in the opinion of the Central Government,
is identical with or too nearly resembles to an existing
trade mark, it may direct the company to change its
name and the company shall change its name or new
name, as the case may be, within a period of six months
from the issue of such direction, after adopting an
ordinary resolution for the purpose.

2013
82
SEECTION PARTICULAR
S
GIST OF PROVISION
54 Issue of
Sweat Equity
Shares
Section 54 of companies act 2013 read with rule 8 of
sub rule (i) A company other than a listed company,
which is not required to comply with the Securities and
Exchange Board of India Regulations on sweat equity,
shall not issue sweat equity shares to its directors or
employees at a discount or for consideration other than
cash, for their providing know-how or making available
rights in the nature of intellectual property rights or
value additions, by whatever name called, unless the
issue is authorized by a special resolution passed by the
company in general meeting.

2013
83
SEECTION PARTICULAR
S
GIST OF PROVISION
54 Issue of
Sweat Equity
Shares
Section 54 of companies act 2013 read with rule 8 of sub
rule (ii) Issue of Sweat Equity Shares (ii) the expression
‘Value additions’ means actual or anticipated economic
benefits derived or to be derived by the company from
an expert or a professional for providing know-how or
making available rights in the nature of intellectual
property rights, by such person to whom sweat equity is
being issued for which the consideration is not paid or
included in the normal remuneration payable under the
contract of employment, in the case of an employee.

2013
84
SEECTION PARTICULARS GIST OF PROVISION
54 Issue of
Sweat Equity
Shares
Section 54 of companies act 2013 read with rule 8 of sub
rule (8) The valuation of intellectual property rights or of
know how or value additions for which sweat equity shares
are to be issued, shall be carried out by a registered valuer,
who shall provide a proper report addressed to the Board
of directors with justification for such valuation.
Section no 2 sub section 88 of companies act 2013 "sweat
equity shares" means such equity shares as are issued by a
company to its directors or employees at a discount or for
consideration, other than cash, for providing their know-
how or making available rights in the nature of intellectual
property rights or value additions, by whatever name
called;

2013
85
123 SCHEDULE III "(ii) For intangible assets, the relevant Indian Accounting
Standards (Ind AS) shall apply. Where a company is not
required to comply with the Indian Accounting Standards
(Ind AS), it shall comply with relevant Accounting Standards
under Companies (Accounting Standards) Rules,
2006."], except in case of intangible assets (Toll Roads)
created under ‘Build, Operate and Transfer’, ‘Build, Own,
Operate and Transfer’ or any other form of public private
partnership route in case of road projects.
(b) Meaning of particulars are as follows :-
Where a company arrives at the amortization amount in
respect of the said Intangible Assets in accordance with any
method as per the applicable Accounting Standards, it shall
disclose the same.]

2013
86
129 SCHEDULE III [(iii) A reconciliation of the gross and net carrying amounts of each
class of assets at the beginning and end of the reporting period
showing additions, disposals, acquisitions through business
combinations, amount of change due to revaluation (if change is
10% or more in the aggregate of the net carrying value of each class
of Property, Plant and Equipment) and other adjustments and the
related depreciation and impairment losses/reversals shall be
disclosed separately.]
(iv) Where sums have been written-off on a reduction of capital or
revaluation of assets or where sums have been added on
revaluation of assets, every balance sheet subsequent to date of
such write-off, or addition shall show the reduced or increased
figures as applicable and shall by way of a note also show the
amount of the reduction or increase as applicable together with the
date thereof for the first five years subsequent to the date of such
reduction or increase.

2013
87
129 SCHEDULE III J. Intangible assets
(i) Classification shall be given as:
(a) Goodwill;
(b) Brands /trademarks;
(c) Computer software;
(d) Mastheads and publishing titles;
(e) Mining rights;
(f) Copyrights, and patents and other intellectual property rights,
services and operating rights;
(g) Recipes, formulae, models, designs and prototypes;
(h) Licenses and franchise;
(i) Others (specify nature).

2013
88
281 Submission of
report by
Company
Liquidator
281(1)Where the Tribunal has made a winding
up order or appointed a Company Liquidator, such liquidator shall,
within sixty days from the order,
submit to the Tribunal, a report containing the following particulars,
namely:—
(a) the nature and details of the assets of the company including their
location and value, stating
separately the cash balance in hand and in the bank, if any, and the
negotiable securities, if any, held
by the company:
Provided that the valuation of the assets shall be obtained from
registered valuers for this
purpose;
(b) amount of capital issued, subscribed and paid-up;
(c) the existing and contingent liabilities of the company including
names, addresses and
occupations of its creditors, stating separately the amount of secured
and unsecured debts, and in the

2013
89
281 Submission of
report by
Company
Liquidator
Section 281 (1)case of secured debts, particulars of the securities given,
whether by the company or an officer
thereof, their value and the dates on which they were given;
(d) the debts due to the company and the names, addresses and
occupations of the persons from
whom they are due and the amount likely to be realized on account
thereof;
(e) guarantees, if any, extended by the company;
(f) list of contributories and dues, if any, payable by them and details of
any unpaid call;
(g) details of trade marks and intellectual properties, if any, owned by
the company;
(h) details of subsisting contracts, joint ventures and collaborations, if
any;
(i) details of holding and subsidiary companies, if any;
(j) details of legal cases filed by or against the company; and(k) any
other information which the Tribunal may direct or the Company
Liquidator may consider
necessary to include.

2013
90
455 Dormant
Company
Section 455 sub section 1 of companies act 2013 Where a company
is formed and registered under this Act for a future project or to
hold an asset or intellectual property and has no significant
accounting transaction, such a company or an inactive company
may make an application to the Registrar in such manner as may be
prescribed for obtaining the status of a dormant company.

PRESENT YOUR PEER
ROUND -II
92

INTRODUCING YOURSELVES
PRESENT YOUR PEER WITH
THE FOLLOWING
PARAMETERS:
93

• INTRODUCTION AND BACKGROUND
• ANY SPECIAL SKILL
• IA SKILL & KNOWLEDGE
94

IDENTIFICATION ROUND
IDENTIYFY THE INTANGIBLE ASSETS
ROUND –III
96

• AUDIO
• ORIGINAL SONG
• COPYCAT
IDENTIFY THE IPR IN THE AUDIO?
97

98
Find out the IPR’s in the following Diagrams
98

WHETHER IT ATTRACTS COPY RIGHTS?
99

100
IDENTIFY THE ORIGINAL WORD
10
0

Need for
the Intangible Assets???
101
10
1

1. Business Value addition
2. Distinguish product from similar products
3. Improve Value for Stake holders
4. Create a Business Image
Need For Intangible Assets
102
10
2

Why this Kolaveri Di?
ROUND –VI
10
4

SAMSUNG Vs. APPLE –
IMPACT OF INTANGIBLE ASSETS
 SAMSUNG was found guilty of
Infringing Apple’s patents for I-
PHONE.
 SAMSUNG had to pay USD 1.05
billion in damages to APPLE.
10
5

How to protect Intangible
Assets and who has to follow
the same
Finally..
106

PROTECTION OF IA’s
The protection of
Intangible Assets
Intellectual property
rights
(formal protection)
Copyright
Patent
Trademark
Contracts
(semi-formal
protection)
Non-disclosure
Non-competition
Informal protection
methods
Secrecy
Restrictedaccessto
information
Databaseand
network protection
107

OVERALL FINDINGS
• Impact of
Share
value of the
firm
• Need for
compliances
relating to
Intangible
Assets
• Need for
awareness &
Information
on Intangibles
• Need for
Realization
and
Disclosure in
Financial
Statement
Management Investors
Share Holders
Legal
Professionals
Contd.
108
108

Broad forms of Security Interests
Forms of
security
interests
Specific
property
General
property
Tangible
property
Future
property
Intangible
property
Movable
property
Immovabl
e
property
Possessory
Interest
Non-
possessory
interest
Mortgage Charge or lien
Posses
sion
Nature of
interest
Quasi-
security
interests
110

Commonly used methods of valuation of
ASSETS
111
Discounted cash flow
Comparable transactions method
Multiples method
Market valuation
111

113
Control
Future economic
benefits
Identifiability
Critical attributes of an intangible asset
11
3

Intangibles Recognition
114
Recognition
Purchased
separately
Purchased as part of
a business
combination
Internally generated
Recognised at cost
Recognise if the fair
value can be reliably
measured.
Research and
development
11
4

Measurement of Intangible assets:
115
MEASUREMENT
INITIAL MEASUREMENT
MEASUREMENT
SUBSEQUENT TO
RECOGNITION
COST MODEL
REVALUATION
MODEL
11
5

Measurement of useful life of Intangible
Assets
116
USEFUL LIFE OF AN
INTANGIBLE ASSET
FINITE LIFE
A LIMITED PERIOD
OF BENEFIT TO THE
ENTITY
INDEFITITE LIFE
NO FORESEEABLE LIMIT TO THE
PERIOD OVER WHICH THE ASSET IS
EXPECTED TO GENERATENET CAHS
INFLOWS FOR THE ENTITY
11
6

117
What is the Need for Valuation
???
117

Intangibles Valuation
cs.ahaladarao@gmail.com
Intangibles - Valuation
118

Need for valuation
Investors
To analyse
best
investment
option
INVESTORS SHARE HOLDERS
To assign true worth of the company
MANAGEMENT
To measure performance of the company
INDUSTRYAS A WHOLE
For the growth of the economy
REGULATORS
To maintain transparency,
Perfect compliance&
Better employment
To analyse best investment option
Financiers
to assess the borrowing
capacity of a company when
arranging funding facilities
119
11
9

VALUATION
APPROACHES AND
METHODOLOGIES
120

What is the best approach??
121

122
VALUATION METHODS
OF INTANGIBLES
COST
APPROACH
MARKET
APPROACH
METHODS
INCOME
APPROACH
122

LEGAL PROVISIONS RELATING TO
INTANGIBLE ASSETS –INTERNATIONAL
Legal
provisions –
International
• WIPO – World Intellectual Property Rights
Organization
• The Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS)
• THE PATENT COOPERATION TREATY
• International Financial Reporting
Standards(IFRS)
• IAS38 – Intangible Assets
• IAS13 – Fair value Measurement
• IAS 36 – Impairment of Assets
• IFRS 3 – Business Combinations
124
124

Legal Provisions relating to Intangible
Assets- National
Patents (Amendment) Act 2005 & Patents (Amendment) Rules, 2006
Trade Marks Act, 1999 & Trade Marks Rules 2002
Copyright Amendment Act 2012
Indian Accounting Standards
• AS26 – Intangible Assets- Recognition, Measurement, Amortisation & Disclosures
• AS14 –Valuation of Intangible Assets acquired by way of Amalgamation
• AS12 – Valuation of Intangible Assets acquired by way of Government Grant
• AS22 – Deferred Tax Assets
• AS19 – Accounting for Leases
• AS21 – Goodwill arising on consolidation
Indian Companies Act
Insolvency and Bankruptcy Code 2016
125
125

Is there any relationship with
ITA with Shares???
Share transfers
126

Who is better person to
that??
Share transfers
127

WHAT IS THE ROLE OF
COMPANY SECRETARY IN
INTANGIBLE ASSETS?
Finally,
128

1. To Act as a Attorney matters relating to Intangible
Assets.
2. To Appear before the Tribunal
3. To Act as Strategies for allotment of the Securities
through the IPR
4. To Draft the Agreements-
a) Assignment Agreement
b) Franchise Agreement
5. To ensure necessary compliances as mentioned in
the law.
6. To arrange the International Funding
7. To set up a company with strategic & financial
Investors
ROLE OF COMPANY SECRETARY…..
129

So friends protect your
Intangible Assets always..
Don’t differentiate with gender
ALL THE BEST

INTANGIBLE ASSETS - VALUATION AND ITS - PPT.pptx

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