Valuation is the practice of estimating a defined monetary value for a single or pooled intangible asset.

1. Business Valuation Methods

2. Valuation Practice
Valuation is the practice of estimating a defined monetary value for a single or pooled
intangible asset
Valuation processes are performed either for transactional (such as commercial
activities) or notational (such as accounting activities) purposes.
Three main approaches to valuation exist (cost, market & income approaches),
each of which have specific strengths & weaknesses, and therefore answer
different needs

3. Valuation in practice General
 A valuation process is structured in similar manners (tasks), whichever
approach (cost, market and/or income) is chosen
 The different tasks include for such process
• Objective definition
• Standard of value selection
• Appraised asset description
• Valuation date or period selection
• Valuation approach(es) selection and related calculations
• Results reporting
 Always remember that a value is subjective, whereas a price is objective
Data
collection
& analysis

4. Valuation in practice: Cost approach
Cost approach : Measure the value of an intangible asset by taking into account all
relevant occurring costs and investments related to the appraised asset
 Historic costs : accounting all costs (effective and sunk) directly related to the
appraised asset (such as securing, research, development, and licensing-in costs)
 Replacement costs : valuing the costs for buying an asset bringing the same utility
than the appraised one
 Reproduction costs : valuing the costs induced in creating, at the time of the
appraisal, a similar asset based on actual knowledge
Cost approach is generally used in situations of high uncertainty and limited
information exist

5. Valuation in practice: Market approach
Market approach : Value consists in the price of a comparable asset in a similar
market transaction
Market approach relates to the quantification and adjustment of pricing
multiples in order to create theoretical comparable conditions
Lack of active and transparent market for IP transactions and market dynamics
have to be taken into account in the process

6. Valuation in practice: Income approach
Income approach : Measure the value of an intangible asset by reference to the
expected and actualized benefits, incomes or saved costs over the remaining
life of the asset
Such prospective-based quantification of financial flows needs to take into
account various risk-related factors such as
Endogenous : Extend of IP protection, nature of competition, …
Exogenous : Substitute product development risks, maturity of market, …

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