Intellectual Property Conference ISO 10668 (Brand Value) – Innovation in Practice Monday 24 th  October 2011 Simon Murriso...
The Firm - Our Philosophy <ul><li>Our client base consists predominantly of owner managed businesses with challenging dema...
About me! <ul><ul><li>Qualified as CA in 1997 </li></ul></ul><ul><ul><li>Joined a 3 partner firm in 1999 & became partner ...
Brand Valuation – set the scene <ul><ul><li>What are Intangibles? </li></ul></ul><ul><ul><ul><li>Easier to explain in cont...
Brand Valuation – set the scene <ul><ul><li>Traditional Accounting Treatment for Intangibles? </li></ul></ul><ul><ul><ul><...
Brand Valuation – set the scene <ul><ul><li>Readily Ascertainable Market - </li></ul></ul><ul><ul><ul><li>HMRC guidance – ...
Brand Valuation – General requirements  <ul><ul><li>Transparency – include disclosure and quantification of valuation inpu...
Brand Valuation – Specific requirements  <ul><ul><li>Declaration of purpose </li></ul></ul><ul><ul><ul><li>Intended use </...
Brand Valuation – Specific requirements  <ul><ul><li>Potential purposes of valuation </li></ul></ul><ul><ul><ul><li>Manage...
Brand Valuation – Specific requirements  <ul><ul><li>Value concept </li></ul></ul><ul><ul><ul><li>Monetary value of a bran...
Brand Valuation – Methods <ul><ul><li>3 Methods currently being used </li></ul></ul><ul><ul><ul><li>Income Approach </li><...
Brand Valuation – Income Approach <ul><ul><li>Measures the value of the brand by reference to the present value of the eco...
Brand Valuation – Income Approach <ul><ul><li>Cash flow methods – </li></ul></ul><ul><ul><ul><li>Price Premium Method – es...
Brand Valuation – Income Approach <ul><ul><li>Financial Variables – </li></ul></ul><ul><ul><ul><li>Discount rate applied <...
Brand Valuation – Market Approach <ul><ul><li>Measures value based on what other purchasers in the market have paid for as...
Brand Valuation – Market Approach <ul><ul><li>Considerations – </li></ul></ul><ul><ul><ul><li>Needs to be comparable </li>...
Brand Valuation – Cost Approach <ul><ul><li>Measures the value of a brand based on the cost invested in building the brand...
Brand Valuation – necessary valuation inputs  <ul><ul><li>Market & financial data </li></ul></ul><ul><ul><li>Brand situati...
Brand Valuation – Examples <ul><ul><li>To follow after coffee break </li></ul></ul><ul><ul><li>Final thought –  </li></ul>...
Over to Ken & Nat after coffee .....  @simonmurrison
Email – simon@gillilandca.com  Tel - 0141 226 8484  Linkedin – Simon Murrison  Twitter - @simonmurrison  Check out our aff...
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Ip Value 24.10.11

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Slides used at today\'s IP conference at Glasgow Uni #uogipc #tdbb #bnivelocityglw

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Ip Value 24.10.11

  1. 1. Intellectual Property Conference ISO 10668 (Brand Value) – Innovation in Practice Monday 24 th October 2011 Simon Murrison Twitter @simonmurrison
  2. 2. The Firm - Our Philosophy <ul><li>Our client base consists predominantly of owner managed businesses with challenging demands and changing requirements . We are committed to providing all our clients with the best professional and commercial services. </li></ul>@simonmurrison
  3. 3. About me! <ul><ul><li>Qualified as CA in 1997 </li></ul></ul><ul><ul><li>Joined a 3 partner firm in 1999 & became partner in 2005 </li></ul></ul><ul><ul><li>Joined a multi-national firm in 2009 as partner </li></ul></ul><ul><ul><li>Returned to smaller sized firm in Jan 2011 </li></ul></ul><ul><ul><li>Entire career spent dealing with start up to medium sized entities </li></ul></ul>@simonmurrison
  4. 4. Brand Valuation – set the scene <ul><ul><li>What are Intangibles? </li></ul></ul><ul><ul><ul><li>Easier to explain in context of tangibles – ‘Tangible assets would consist of exclusively of assets with a physical substance capable of being touched and intangible assets would comprise solely incorporeal rights. </li></ul></ul></ul><ul><ul><ul><li>Non-financial fixed assets that do not have physical substance but are identifiable and controlled by the entity through custody or legal rights. </li></ul></ul></ul><ul><ul><ul><li>Examples would include goodwill, patents, brands and trademarks. </li></ul></ul></ul><ul><ul><ul><li>Deferred expenditure such as research and development costs are also considered an intangible asset. </li></ul></ul></ul>@simonmurrison
  5. 5. Brand Valuation – set the scene <ul><ul><li>Traditional Accounting Treatment for Intangibles? </li></ul></ul><ul><ul><ul><li>Purchased goodwill - usually the difference between the purchase price and the book value of the assets. </li></ul></ul></ul><ul><ul><ul><li>Will be appear in the Balance Sheet as an asset and then amortised (written off) over 20 years or useful life. </li></ul></ul></ul><ul><ul><ul><li>Should not be shown at a value greater than its recoverable amount – Impairment Reviews required. </li></ul></ul></ul><ul><ul><ul><li>Internally generated goodwill – will not be recognised on the company’s Balance Sheet. </li></ul></ul></ul><ul><ul><ul><li>Internally developed intangible assets should be capitalised only where they have a readily ascertainable market. </li></ul></ul></ul>@simonmurrison
  6. 6. Brand Valuation – set the scene <ul><ul><li>Readily Ascertainable Market - </li></ul></ul><ul><ul><ul><li>HMRC guidance – </li></ul></ul></ul><ul><ul><ul><ul><li>The assets belongs to a population of assets that are equivalent in all material aspects, and </li></ul></ul></ul></ul><ul><ul><ul><ul><li>An active market, evidenced by frequent transactions, exists for that population of assets. </li></ul></ul></ul></ul><ul><ul><ul><li>Example would be milk quota held by a farming company. </li></ul></ul></ul><ul><ul><ul><li>Same rules apply to brands </li></ul></ul></ul>@simonmurrison
  7. 7. Brand Valuation – General requirements <ul><ul><li>Transparency – include disclosure and quantification of valuation inputs, assumptions & risks </li></ul></ul><ul><ul><li>Validity – based on valid and relevant inputs and assumptions as of the value date </li></ul></ul><ul><ul><li>Reliability – if repeated give comparable & reconcilable result </li></ul></ul><ul><ul><li>Sufficiency – based on sufficient date and analysis to form a reliable conclusion </li></ul></ul><ul><ul><li>Objectivity – appraiser be free from any form of biased judgement </li></ul></ul><ul><ul><li>Need to consider financial, behavioural and legal parameters </li></ul></ul>@simonmurrison
  8. 8. Brand Valuation – Specific requirements <ul><ul><li>Declaration of purpose </li></ul></ul><ul><ul><ul><li>Intended use </li></ul></ul></ul><ul><ul><ul><li>Addressed audiences </li></ul></ul></ul><ul><ul><ul><li>The identified asset </li></ul></ul></ul><ul><ul><ul><li>The premise of value </li></ul></ul></ul><ul><ul><ul><li>The position of the appraiser </li></ul></ul></ul><ul><ul><ul><li>The valuation date </li></ul></ul></ul><ul><ul><ul><li>The value date </li></ul></ul></ul>@simonmurrison
  9. 9. Brand Valuation – Specific requirements <ul><ul><li>Potential purposes of valuation </li></ul></ul><ul><ul><ul><li>Management information </li></ul></ul></ul><ul><ul><ul><li>Strategic Planning </li></ul></ul></ul><ul><ul><ul><li>Value Reporting </li></ul></ul></ul><ul><ul><ul><li>Accounting </li></ul></ul></ul><ul><ul><ul><li>Liquidation </li></ul></ul></ul><ul><ul><ul><li>Legal Transaction </li></ul></ul></ul><ul><ul><ul><li>Licensing </li></ul></ul></ul><ul><ul><ul><li>Litigation support / dispute resolution </li></ul></ul></ul>@simonmurrison
  10. 10. Brand Valuation – Specific requirements <ul><ul><li>Value concept </li></ul></ul><ul><ul><ul><li>Monetary value of a brand shall represent the economic benefit conferred by the brand over its useful economic life. </li></ul></ul></ul><ul><ul><li>Identification of brand </li></ul></ul><ul><ul><ul><li>The appraisal shall identify, define and describe the brand subject to valuation </li></ul></ul></ul>@simonmurrison
  11. 11. Brand Valuation – Methods <ul><ul><li>3 Methods currently being used </li></ul></ul><ul><ul><ul><li>Income Approach </li></ul></ul></ul><ul><ul><ul><li>Market Approach </li></ul></ul></ul><ul><ul><ul><li>Cost Approach </li></ul></ul></ul><ul><ul><li>Value concept & characteristics of the brand will dictate which approach is used </li></ul></ul>@simonmurrison
  12. 12. Brand Valuation – Income Approach <ul><ul><li>Measures the value of the brand by reference to the present value of the economic benefits expected to be received over the remaining useful economic life of the brand. </li></ul></ul><ul><ul><li>Estimating the expected after-tax cash flow streams attributable to the asset over its remaining economic life, and converting these after-tax cash streams to present value through discounting with an appropriate discount rate </li></ul></ul>@simonmurrison
  13. 13. Brand Valuation – Income Approach <ul><ul><li>Cash flow methods – </li></ul></ul><ul><ul><ul><li>Price Premium Method – estimate the value of a brand by reference to the price premium it creates. </li></ul></ul></ul><ul><ul><ul><li>Volume Premium Method – estimate the value of a brand by reference t the volume premium that it generates. </li></ul></ul></ul><ul><ul><ul><li>Income-split Method – value the brand as the present value of the portion of economic profit attributable to the brand. </li></ul></ul></ul><ul><ul><ul><li>Multi-period Excess Earnings Method – present value of the future residual cash flow after deducting returns for all other assets required to operate the business. </li></ul></ul></ul><ul><ul><ul><li>Incremental Cash Flow Method – the cash flow generated by a brand in a business through comparison with a comparable business with no such brand. </li></ul></ul></ul><ul><ul><ul><li>Royalty Relief Method – present value of expected future royalty payments assuming that the brand is not owned but licensed. </li></ul></ul></ul>@simonmurrison
  14. 14. Brand Valuation – Income Approach <ul><ul><li>Financial Variables – </li></ul></ul><ul><ul><ul><li>Discount rate applied </li></ul></ul></ul><ul><ul><ul><li>Useful economic life. </li></ul></ul></ul><ul><ul><ul><li>Tax rate – cash flow is ‘after tax’. </li></ul></ul></ul>@simonmurrison
  15. 15. Brand Valuation – Market Approach <ul><ul><li>Measures value based on what other purchasers in the market have paid for assets that can be considered reasonably similar to those being valued. </li></ul></ul><ul><ul><li>The application of market approach shall result in an estimate of the price reasonably expected to be realised if the brand were to be sold. </li></ul></ul>@simonmurrison
  16. 16. Brand Valuation – Market Approach <ul><ul><li>Considerations – </li></ul></ul><ul><ul><ul><li>Needs to be comparable </li></ul></ul></ul><ul><ul><ul><li>Brand strengths </li></ul></ul></ul><ul><ul><ul><li>Goods and services similar </li></ul></ul></ul><ul><ul><ul><li>Economic and legal situation </li></ul></ul></ul><ul><ul><ul><li>Closeness in time to transaction </li></ul></ul></ul><ul><ul><ul><li>Independent parties involved </li></ul></ul></ul><ul><ul><ul><li>Similar strategic values & synergies </li></ul></ul></ul>@simonmurrison
  17. 17. Brand Valuation – Cost Approach <ul><ul><li>Measures the value of a brand based on the cost invested in building the brand, or its replacement or reproduction cost. </li></ul></ul><ul><ul><li>The actual cost invested in the brand shall encompass all costs spent on building and protecting the brand up to the value date. </li></ul></ul><ul><ul><li>The cost to replace the brand shall include the cost of constructing a similar brand of equivalent utility at prices applicable at the time of the valuation analysis. </li></ul></ul>@simonmurrison
  18. 18. Brand Valuation – necessary valuation inputs <ul><ul><li>Market & financial data </li></ul></ul><ul><ul><li>Brand situation </li></ul></ul><ul><ul><li>Brand strength </li></ul></ul><ul><ul><li>Effect on demand </li></ul></ul><ul><ul><li>Legal </li></ul></ul><ul><ul><ul><li>Protection </li></ul></ul></ul><ul><ul><ul><li>Rights to the Brand </li></ul></ul></ul><ul><ul><ul><li>Ownership </li></ul></ul></ul>@simonmurrison
  19. 19. Brand Valuation – Examples <ul><ul><li>To follow after coffee break </li></ul></ul><ul><ul><li>Final thought – </li></ul></ul><ul><ul><ul><li>Remember internal figures can only be used on the balance sheet if readily ascertainable market available </li></ul></ul></ul>@simonmurrison
  20. 20. Over to Ken & Nat after coffee ..... @simonmurrison
  21. 21. Email – simon@gillilandca.com Tel - 0141 226 8484 Linkedin – Simon Murrison Twitter - @simonmurrison Check out our affinity scheme at – www.glasgowchamberofcommerce.com

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