tag:blogger.com,1999:blog-7923005810906159036.post232646585800910786..comments2024-03-27T12:49:05.975+00:00Comments on IP finance: Cost-based valuation: is it a live issue?Anne Fairpohttp://www.blogger.com/profile/02579190868405783459noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7923005810906159036.post-8158024576919267242008-09-01T04:23:00.000+01:002008-09-01T04:23:00.000+01:00The valuation of IP has been the subject of discus...The valuation of IP has been the subject of discussion in so many articles that I’ve (almost) stopped reading them – which may concern the publishers of LES Nouvelles! <BR/><BR/>It seems that it’s an area where lawyers and accountants will never see eye to eye and no one method is the right method in all circumstances – that’s the easy point to make. As for the cost-based approach, I’ve seen it used many times where it’s the only method available at the time in question, e.g. for assessing tax or duty on the value of an acquisition which relates to or includes IP assets. The cost-based approach, of course, is utterly irrelevant if one is looking for a true, commercial value. <BR/><BR/>At most it may be a “sanity check” and is used in commercial negotiations, perhaps:<BR/><BR/>haggling over damages for infringement – not that a court would accept it, but perhaps of some relevance if diminution in value is an issue <BR/>to justify a purchase price or licence fee (up or down) <BR/>to encourage investors, many IMs or prospectuses will include a “valuation” on this basis, <BR/>but it’s hardly reliable. <BR/><BR/>Not sure that one can discard it all together but I’d never give it any credibility. <BR/><BR/>All the best, <BR/><BR/>JulianJulianhttps://www.blogger.com/profile/04642623842940248263noreply@blogger.comtag:blogger.com,1999:blog-7923005810906159036.post-75619153405872470742008-08-28T18:49:00.000+01:002008-08-28T18:49:00.000+01:00In the U.S., FAS 141 goes into effect later this y...In the U.S., FAS 141 goes into effect later this year. It permits R&D to be capitalized as a balance sheet asset. This is bad if you believe (as I do) that cost measures of IP-value will create perverse incentives for management.<BR/><BR/>The larger point is that cost and comparables methods are terrible because of the incentives they create. Revenue-based methodologies need to get much better. In particular, I have advocated elsewhere that we could make better use of frequency-averaged measures of revenue (such as turnover rates) in assessing the impact of new inventions on overall profitability. Not all inventions show up as obvious changes in time-averaged sales and costs of sales. But all valuable inventions should have <I> some </I> measurable impact on production.Michael F. Martinhttps://www.blogger.com/profile/15279501532684851571noreply@blogger.com