Valuation is the process of estimating the worth of assets or liabilities. There are three main approaches to valuing intangible assets: the cost approach, which values assets based on development costs; the income approach, which discounts future income from an asset to its present value; and the market approach, which uses market prices of comparable assets. The income approach is generally considered the most useful if sufficient data is available, while the cost approach may underestimate value and the market approach can be limited by lack of comparable market data.

1. Presented By:
Javed Khan 007
Rohit Tiwari 014

2. Valuation is the process of estimating what something is
worth. Items that are usually valued are a financial asset of
liability. Valuation can be done on assets (for
example, investments in marketable securities such as
stocks, options, business enterprises, or intangible assets
such as patents and trademarks) or on liabilities (e.g. bonds
issued by a company). Valuations are needed for many
reasons such as investment analysis, capital
budgeting, merger and acquisition transactions, financial
reporting, taxable events to determine the proper tax liability.

3. An asset that is not physical in nature. An Intangible Assets include:
1. Intellectual property Rights
(Patents, trademarks, copyrights, software, database, trade
secrets, know-how, registered designs, domain names)
2. Goodwill
3. Brand name
An intangible asset can be classified as either indefinite or definite
depending on the specifics of that asset. A company brand name is
considered to be an indefinite asset, as it stays with the company
as long as the company continues operations. However, if a
company enters a legal agreement to operate under another
company's patent, with no plans of extending the agreement, it
would have a limited life and would be classified as a definite
asset.

4. Valuation models can be used to value intangible
assets such as patents, copyrights, software, trade
secrets, and customer relationships. The value
placed on intangibles assets, such as
people, knowledge, relationships and intellectual
property, is now a greater proportion of the total
value of most businesses than is the value of
tangible assets, such as machinery and equipment.

5. The International Valuation Standards Board issues Guidance Notes to
guide experienced valuers on the application of the fundamental principles
of the International Valuation Standards (IVS) to a spcific asset type or for
a specific valuation purpose.
IFRS 3, paragraph 13, and IAS 38, paragraph 34, requires that intangible
assets arising from a business combination are recognised at their fair
value.
Some companies will recognise significant benefits by electing to adopt
IFRS 3 retrospectively. You should seriously consider this election if:
 Your intangible assets are not currently reported on the balance sheet
 Intangible assets, particularly brands, are key business drivers.
 You made significant acquisitions of brands or other intangible assets in
recent years
 You have good historic records

6. Valuations of intangible assets are required
for many different purposes including:
 Acquisitions, mergers and sales of businesses
or parts of businesses.
 Purchases and sales of intangible assets .
 Reporting to tax authorities.
 Litigation.
 Financial reporting.

8. There is consensus among valuers that there are three main
valuation approaches when valuing intangible assets:
Cost Approach
Income Approach
Market Approach

9. Cost based methodologies assume that the value of the asset is
related to the costs incurred in developing or redeveloping it. While
cost is not the same thing as value, it is an acknowledged benchmark
for certain types of assets, typically software and workforces.
Cost approach is generally the least applicable approach
In the appraisal of marketing intangible assets’ and that ‘in
many instances, the cost approach will underestimate the
value.
Overestimation is also possible, for example, if software
projects get out of control, costs can rise, often in inverse
proportion to the functional quality of the software. The cost
approach may also be less applicable when the asset is old
or unique, or hard to recreate.

10. In this approach, the value of the subject intangible asset is
estimated as ‘the present value of the future economic income
attributable to the ownership of the asset over its expected
remaining useful life.
This approach involves ascertaining the likely future
income streams that would accrue to the owner of the
subject asset and discounting these back to the date of
valuation to reflect the time value of money and the risks
associated with each income.
It is generally held that, if the data are available, the most
useful approach to valuing intangible assets is the income
approach.

11. In this approach assets and transactions relevant to the valuation
date involving assets that are similar to the subject asset are used
as guidelines to estimate how the market might value the subject
asset.
If relevant data is available this must be considered. In the
presence of good data the market approach is one of the most
direct and systematic approaches to valuation, but it is frequently
the case that relevant data is not readily available.