In the present article, I will inform you regarding the valuation of intangible assets. Present procedure is the most applicable in valuation activities.

In practice, the valuation intangible assets is done via three approaches: cost, market and income. Each method comprises specific principles and rules. Sometimes, specialist can combine several approaches in order to obtain more accurate results.

In order to understand in details the procedure of valuation of intangible assets, we will consider peculiarities of income approach application.

In practice, this method is the most common and in demand among expert valuators. It is based on the principle of fixed earnings, which the company receives from the use and sale of intangible assets.

Components of income

What does this income depend on? Income for intangible assets depends on the following indicators:

• Earnings that company receives for sales of intangible assets;
  
  
• Increase of the company's income for use of intangible assets;
  
  
• Savings of net profit.
  
  

Besides, very important are the authority and popularity of the company. Let's consider an example.

Intangible assets comprise such objects: trademarks, patents, copyrights and etc. How do you think, in which company intangible assets will cost more: newly established or brand that is known in whole country? Second one, of-course. The more goods are in demand and products are popular, the more expensive will be the valuated intangible assets.

Basis of income approach

Income approach is based on the following idea - the buyer will not pay for intangible assets value that will be more than received profit. For example, if intangible assets generate annual income UAH 250'000, it is unlikely that the buyer will be willing to pay UAH 1'000'000 for them. However, it should be taken into account payback indicators and the possible development of the objects.

If a specialist selected income approach for valuation, he will need to analyze real income for use and sale of intangible assets, development prospects and calculate future profits. Based on the obtained data, expert obtains final market value of intangible assets.

How can client order valuation of intangible assets?

Specialists of my valuation company perform valuation of intangible assets via different approaches, based on the conditions and requirements of the client. For more than 10 years of experience, our team managed to complete quickly and successfully projects in accordance with all national requirements and standards.

If you have questions or would like to order intangible assets valuation, I advise you to cooperate with an expert-valuator. You can contact me personally or my team and obtain completely free of charge consultation. For this purpose, send request on our site.