Valuing intangible assets

An intangible asset does not have any physical substance yet provides an economic benefit to the owner.

Types of intangible assets

Intangible assets are considered to fall into one or more of the following categories:

  • Marketing: Used for promotion, such as trademarks and internet domains
  • Customer: Such as customer lists and customer contracts
  • Artistic: Rights of the artist to benefit from books, music etc.
  • Contract: Such as royalty agreements and lease agreements
  • Technology: Such as databases and technology patents

Income approach methods

The income approach is the common approach to valuing intangible assets.  Key methods include:

  • Excess earnings
  • Relief from royalties
  • Premium profits
  • Greenfield
  • Distributor

See here for details on valuation approaches

See here for details on valuing goodwill

About the Author

Simon Cook Virtual CFOSimon specialises in providing forensic accounting and valuation services. Prior to founding Lotus Amity, he was a Forensic Accounting partner with BDO Australia and led their National Forensics practice.  He has worked as a forensic director for a major offshore forensic accounting practice which included assisting in multi-billion-dollar litigation in relation to the largest Bernie Madoff feeder fund.  He has also held senior management positions with Deloitte and Crowe Horwath.  Simon is a Chartered Accountant, CA Accredited Business Valuer and a Certified Fraud Examiner.

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