Purposes for Intangible Asset and IP Valuations
Intangible assets are assets, other than financial assets, that lack physical substance. Over the past 25 years, intangible assets have become critical assets for most operating companies. Studies indicate that global intangible asset value exceeds $50 trillion and almost all agree that, for most business enterprises, the majority of value is comprised of intangible assets.
Aside from the enormous value of intangible assets, in today’s business world intangible asset transactions occur frequently and certain tax strategies depend importantly on the value of same. Understanding the value of intangible assets can be challenging for many but the process begins with asset identification. To this end, it is often overlooked that there are only four kinds of intellectual property (IP) rights that the laws of the U.S. and most industrialized nations recognize: patents, copyrights, trademarks, and trade secrets. However, despite limited legal protection, the value of intangible assets and goodwill often goes well beyond IP-based legal rights. In fact, there are dozens of identifiable intangible assets and therefore it is critical to hire a seasoned valuation expert. A list of intangible assets which MPI has experience valuing may be found here.
MPI has conducted hundreds of intangible asset valuations for clients at various stages of their life cycle. We have assisted on the following types of assignments:
- Corporate restructuring transactions involving a transfer of IP
- Impairment testing purposes under ASC Topic 350/360
- Purchase price allocations of goodwill and intangibles under ASC Topic 805
- Transfer pricing for internal and external IP transactions
- Valuations for estate planning or estate tax administration purposes
For a full list of valuation purposes related to IP and intangible assets, click here.
Determining a credible value for intangible assets and goodwill can be challenging as such assets are hard to price. Oftentimes, intangible assets do not generate any income, or if income is generated it cannot be generated in isolation but rather requires contributions from other corporate assets. Further complicating matters is that due to their very nature, intangible assets are constantly changing and therefore the value of intangible assets changes over time as well.
The diligence, procedures, and considerations, among other factors, required to value intangible assets make it critical that you hire a seasoned valuation Practitioner. MPI has the experience and expertise to provide reliable intangible asset valuations. Please contact us if we may be of assistance.