Intangible Assets valuation is one of the latest developments where intangible assets such as trademarks, patents, copyright infringement, franchises, brands, customer contracts, and non-competition agreements need to be valued as a separate class of assets by organisations and companies. Some of the reasons include the following:

• Identifying the right price

Valuation of such intangible assets or intellectual property rights (IPR) is important in order to know what’s the price offered to be bought or sold. In this way, neither the buyer won’t make the mistake of overpaying for an asset, and the seller will not mistakenly accept a discounted price for it.

• Mergers and Acquisition 

Intangible Assets valuation is essential when two companies are merging or if a company is being acquired since it helps both sides determine the actual value of the hidden value of the intellectual property rights contained in the business-like brand names or trademarks.

Section 19B of the Singapore Income Tax Act

A company can claim writing down allowances (WDAs) on capital expenditures incurred on the acquisition of qualifying Intellectual Property Rights (IPRs) for use in its business or trade under Section 19B of the Singapore Income Tax Act.

 For the purpose of Section 19B, the qualifying IPRs are:

1. Patents;
2. Copyrights;
3. Trademarks;
4. Registered designs;
5. Geographical indications;
6. Lay-out designs of an integrated circuit;
7. Trade secrets or information with commercial value; and
8. Plant varieties.

Intangible assets should be valued by a certified or accredited valuer or appraiser. Valuators mainly use one of the three following methods for the valuation of intangible assets: the cost, market, and income approaches. It is important to note, however, that within these applications, there are subsets specific to the valuation of intangible assets. It is possible to calculate the value of an intangible asset in more than one way. Value indications that can be validated through more than one method increase the reasonableness of the value conclusion.

An intangible asset is an asset that is not physical in nature. Intangible assets add value to your business even though they do not have a physical presence. Some examples of intangible assets are intellectual property rights, such as trademarks, patents, copyrights, franchises, brands, customer relationships or contracts, and non-competition agreements.

One of the common difficulties in the valuation of intangible assets is identifying what counts as an intangible asset in the first place. Business managers should value each Intangible asset as a separate class when valuing Intangible Assets. Besides putting the price tag on brands, trademarks, patents, copyrights and more, other aspects of a business can be included on the list. Capital spent on research and development into new products or expenditure can also be included.

After determining that an item is an intangible asset, the entity must determine if it also meets the recognition criteria. It is only possible to recognise an intangible asset if the cost can be measured reliably, and the entity has foreseeable future economic benefits (for example, revenues from the sale of products) attributable to the asset.