Market valuation

Contd

It can be difficult to ensure that the asset under consideration and that subject to the market transaction are sufficiently comparable. Therefore, this methodology can be difficult to apply in practice.
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Cost valuation

A cost valuation considers the cost of recreating the intangible asset building it from scratch - and the amount that was spent in building the asset in the first place. Intangible Business generally uses an appreciation of all three approaches, tailoring the final valuation to suit the particular project requirement
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Cost valuation

Contd..

While cost is not the same thing as value, it is an acknowledged benchmark for certain types of assets, typically software and workforces. Cost based approaches should be viewed with caution, as the cost of recreating or replacing an asset of this nature is not necessarily an accurate indication of the future value of that asset. However, cost methods can be a useful 323 8/2/2011 Aurnob UBS

Income valuation

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Forecasting future cash flows that are directly attributable to the brand or other intangible asset is central to this approach. A royalty rate is applied to the future cash flows which is then discounted to reflect the risk and time value of money. This approach is especially pertinent for an opportunityUBS Aurnob brand value 424

Relief from royalty

This method assesses the value of a brand name based on the cost of renting it (i.e. what would the market be willing to pay to license and use the name?).

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Marketing-Related Intangible Assets

Examples are:

trademarks or trade names, Internet domain names, and noncompetition agreements.

Trademark or trade name has legal protection for indefinite number of 10 year renewal periods. No amortization.
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Customer-Related Intangible Assets

Examples are:

customer lists, order or production backlogs, and both contractual and non contractual customer relationships.

Amortized to expense over useful life.

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Artistic-Related Intangible Assets

Examples are:

plays, literary works, musical works, pictures, photographs, and video and audiovisual material.

Copyright is granted for the life of the creator plus 70 years. Amortized to expense over useful life.
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Contract-Related Intangible Assets

Examples are:

franchise and licensing agreements, construction permits, broadcast rights, and service or supply contracts.

Franchise (or license) with a limited life should be amortized to expense over the life of the franchise.

Franchise with an indefinite life 8/2/2011 Aurnob UBS 1030 should be carried at cost and not

Technology-Related Intangible Assets

Examples are:

patented technology (computer software), unpatented technology (know-how), trade secrets such as secret formulas, processes and recipes.

Patent gives the holder exclusive use for a period of 20 years.

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Expense any R&D costs in 8/2/2011 Aurnob UBS developing a patent.

Goodwill

Only recorded when an entire business is purchased because goodwill cannot be separated from the business as a whole. Goodwill is recorded as the excess of purchase price over the fare market value of the identifiable net assets acquired.
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Interbrand

The Interbrand approach uses a three-year weighted average of profits after tax as an indicator of brand profitability. In calculating brand profitability, Interbrand strives to consider only factors that relate directly to the brand's identity. Once brand profitability is determined, a multiplier is attached to the calculation.
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The multiplier is created from an evaluation of brand strength based on seven factors, which are weighted according to Interbrand's guidelines.

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References
www.brandfinance.com www.deloitte.com

www.interbrand.com/best_global_brands.aspx?year=2008&langid

www.rics.org/NR/rdonlyres/FC6AAA16-E121-4242-BDCC-9470DC3 http://www.investopedia.com/terms/i/intangibleasset.asp http://hubpages.com/tag/brand+valuation/hot http://knol.google.com/k/management-accounting-brandvaluation

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Questions?

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1.

What are the three main approaches to determine brand value adopted by Intangible asset? Determine the three primary functions of brands? Why value Intangible asset?

1.

1.

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Aurnob UBS

THANK YOU
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