What is intangible asset valuation?
intangible asset valuation is a method that accountants determine the influence of an intangible asset on the company's balance sheet. Unlike other accounting procedures, determining the transaction value of an intangible asset is a demanding process. Intangible assets include both intellectual property, such as grants, logos or trademarks, as well as good will from the purchase of another company. Intangible asset valuation requires legal and financial analysis.
From a legal point of view, determining the value of an intangible asset is a direct process. Using the cost of costs, they record accounting costs incurred to obtain the rights to the acquired intangible asset. For franchise owners, this price is usually the amount paid by the parent company every year. For example, the owner of fast food franchise pays a fee for using the company's logo, image and products. The legal value of this intangible asset is the cost of the fee, but the franchise owner also receives considerable contribution from the public recognition of the company's name.
Legal costs of a piece of mental VLAgains are often small. Registration of copyright and trademarks usually costs less than $ 100. Legal costs may also include any money spent in defense of an intangible asset, such as fees for legal representation for litigation. These costs can be amortized or calculated as expenditure for the useful life of the asset. In the case of indefinite assets, the amortization is not in accordance with accounting standards.
The business value of an intangible asset requires the evaluation of the expected benefit that the asset will bring to the company. Accounting can only record financial transactions that can complicate intangible asset valuation. An indirect way to complete this process is a comparison of the income of other companies that have similar intangible assets. The SACTional ONGUACE Transmetode allows the company to require the same value of assets for a similar intangible asset.
methodSpare costs are another possibility for valuation of intellectual property. Financial analysis of research and development costs for creating a similar item determines the valuation of this method. The idea is that if legal sanctions prohibit the use of the current intangible asset, the valuation of this asset is the cost of creating a new one that meets legal criteria.
The final selection is the method of intangible asset valuation. This method requires accounting to consider the future potential of intangible asset receiving. This income may be through direct income or spin-off use of intellectual property.
Using the reception method, the financial managers must determine how likely it is that an intangible asset is to make money and have an estimate of this income. A financial manager for a company with a new patent for a cold instance pain would have to determine the market value of cold cream, profit per unit and the probable number of units sold. This method will lead to an intangible asset.