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Market valuation Contd

It can be difficult to ensure thatthe asset under considerationand that subject to the markettransaction are sufficientlycomparable. Therefore, this

methodology can be difficult toapply in practice.

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Cost valuation

A cost valuation considers the cost ofrecreating the intangible asset -building it from scratch - and the

amount that was spent in buildingthe asset in the first place.

Intangible Business generally uses an

appreciation of all three approaches,tailoring the final valuation to suit theparticular project requirement

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Cost valuation Contd.. While cost is not the same thing

as value, it is an acknowledgedbenchmark for certain types ofassets, typically software and

workforces. Cost based approaches should be

viewed with caution, as the cost ofrecreating or replacing an asset ofthis nature is not necessarily anaccurate indication of the futurevalue of that asset. However, cost

methods can be a useful8/2/2011 Aurnob UBS 323

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Income valuation

Forecasting future cash flows thatare directly attributable to the

brand or other intangible asset iscentral to this approach. A royaltyrate is applied to the future cashflows which is then discounted to

reflect the risk and time value ofmoney. This approach isespecially pertinent for an

opportunity brand value8/2/2011 Aurnob UBS 424

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Relief from royalty

This method assesses the value

of a brand name based on thecost of renting it (i.e. what wouldthe market be willing to pay tolicense and use the name?).

8/2/2011 Aurnob UBS 525

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Marketing-RelatedIntangible Assets

Examples are:

trademarks or trade names, Internetdomain names, and noncompetition

agreements.

Trademark or trade name has legalprotection for indefinite number of 10year renewal periods.

No amortization.8/2/2011 Aurnob UBS 727

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Customer-Related IntangibleAssets

Examples are:

customer lists, order or productionbacklogs, and both contractual and non

contractual customer relationships.

Amortized to expense over usefullife.

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Artistic-Related IntangibleAssets

Examples are:

plays, literary works, musical works,pictures, photographs, and video and

audiovisual material.

Copyright is granted for the life ofthe creator plus 70 years.

Amortized to expense over usefullife.

8/2/2011 Aurnob UBS 929

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Contract-Related IntangibleAssets

Examples are:

franchise and licensing agreements,construction permits, broadcast rights,

and service or supply contracts.

Franchise (or license) with a limitedlife should be amortized to expenseover the life of the franchise.

Franchise with an indefinite lifeshould be carried at cost and not8/2/2011 Aurnob UBS 1030

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Technology-RelatedIntangible Assets

Examples are:

patented technology (computersoftware), unpatented technology

(know-how), trade secrets such assecret formulas, processes and recipes.

Patent gives the holder exclusive usefor a period of 20 years.

Expense any R&D costs in

developing a patent.8/2/2011 Aurnob UBS 1131

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Goodwill

Only recorded when an entirebusiness is purchased becausegoodwill cannot be separated from

the business as a whole.

Goodwill is recorded as the excess ofpurchase price over the fare marketvalue of the identifiable net assetsacquired.

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Interbrand

The Interbrand approach uses athree-year weighted average ofprofits after tax as an indicator of

brand profitability. In calculatingbrand profitability, Interbrand strivesto consider only factors that relate

directly to the brand's identity. Oncebrand profitability is determined, amultiplier is attached to thecalculation.

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The multiplier is created from anevaluation of brand strengthbased on seven factors, which are

weighted according to Interbrand'sguidelines. leadership Stability Market DiversificationTrends Support8/2/2011 Aurnob UBS 1434

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References

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

www.brandfinance.com

www.deloitte.com

www.rics.org/NR/rdonlyres/FC6AAA16-E121-4242-BDCC-9470DC

http://www.investopedia.com/terms/i/intangibleasset.asp

http://hubpages.com/tag/brand+valuation/hot

http://knol.google.com/k/management-accounting-brand-valuation

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http://www.interbrand.com/best_global_brands.aspx?year=2008&langid=1000http://www.brandfinance.com/http://www.deloitte.com/http://www.rics.org/NR/rdonlyres/FC6AAA16-E121-4242-BDCC-9470DC312B1B/0/IntAssetsWebVersion.pdfhttp://www.investopedia.com/terms/i/intangibleasset.asphttp://hubpages.com/tag/brand+valuation/hothttp://hubpages.com/tag/brand+valuation/hothttp://www.investopedia.com/terms/i/intangibleasset.asphttp://www.rics.org/NR/rdonlyres/FC6AAA16-E121-4242-BDCC-9470DC312B1B/0/IntAssetsWebVersion.pdfhttp://www.deloitte.com/http://www.brandfinance.com/http://www.interbrand.com/best_global_brands.aspx?year=2008&langid=1000

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Questions??

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1. What are the three main approaches to determine brandvalue adopted by Intangible asset?

1. Determine the three primary functions of brands?

1. Why value Intangible asset?

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THANK

YOU

AurnobUBS