1. What are intangible assets?
   1. no physical substance
      1. Main examples
         1. patents
         2. trademarks
         3. customer lists
      2. Extensive examples
         1. Artistic assets
            1. photos
            2. videos
            3. paintings
            4. movies
            5. audio recordings
         2. Defensive assets
         3. Leasehold improvements
         4. Software developed for internal use
         5. Internally developed and not specifically identifiable
            1. charge its cost to expense
         6. Goodwill
   2. cannot be used as collateral on a loan
   3. Initial Recognition of Intangible Assets
      1. is recorded at its acquisition cost
      2. be charged to expense in the period incurred
   4. Amortization of Intangible Assets
      1. a finite useful life
         1. amortize it over that useful life
      2. impaired
         1. reduced carrying amount of the asset, and possibly a reduced useful life.
      3. indefinite useful life
         1. cannot amortize it
         2. periodically evaluate the asset
            1. if it now has a determinable useful life. If so, begin amortizing it over that period
            2. continues to have an indefinite useful life
            3. to see if its value has become impaired.
      4. goodwill
         1. cannot amortize
         2. periodically evaluate it to see if its value has become impaired.
   5. Impairment test
      1. impairment
         1. the difference between the cost and the fair value of the asset
         2. Cash flow
            1. historical and projected operating or cash flow losses associated with the asset.
         3. Costs
         4. Disposal
            1. The asset is more than 50% likely to be sold
            2. disposed of significantly before the end of its previously estimated useful life
         5. Legal
         6. Market price
         7. Usage
   6. Impairment Testing for Intangible assets
      1. an impairment of intangible assets
         1. an impairment loss
         2. a debit to an impairment loss account
         3. a credit to the intangible assets account
   7. Patents
      1. R&D expenditures
      2. Useful life
         1. not be amortized for longer than the life span of the protection afforded by the patent
      3. Capitalization limit
         1. so small that they do not meet or exceed a company's capitalization limit
            1. charge these costs to expense as incurred
         2. larger companies
            1. are rarely recorded as assets unless they have been purchased from other entities.
   8. how the intangible asset is used to generate income
      1. 1.direct use of the intangible asset
      2. 2. indirect use of the intangible asset
         1. owner licenses the use of the intangible asset to a third part operator
            1. generates license income
      3. 3. forbearance of the use of the intangible asset
         1. owner does not use the intangible asset but also does not allow any other party to use the intangible asset
         2. involves a defensive use of an intellectual property such a patent, trademark or copyright.
   9. The different methods of valuation
      1. Cost Appoach
         1. based on the economics principle of substitution
         2. applicable to
            1. the valuation of contributory
            2. internal use
            3. “back room” type intangible assets
      2. Market Approach
         1. applicable
            1. in the analysis of intangible assets that do not directly generate measurable operating or license income
      3. Income approach
         1. applicable
            1. intangible assets that produce any measure of either operation income or license income
2. Introduction
   1. new generation of firms
      1. no physical form
      2. intangible assets
         1. brand name (Coca Cola)
         2. patents (Pfizer)
         3. technological expertise (Intel, Microsoft)
         4. the value comes from the bundle of legal rights associated with that asset
      3. common features
         1. traditional accounting rules either understate their value or completely ignore them
         2. a significant portion of the market values of these firms comes from these intangible assets
            1. brand name: explain more than half of the value
   2. International generally accepted accounting principles (GAAP)
      1. recognition of identifiable intangible assets
3. Identification of intangible assets
   1. Characteristics of an Intangible Asset
      1. economic phenomenon
         1. be intangible
         2. be an asset
      2. the value comes from the bundle of legal rights associated with that asset
      3. be subject to private ownership
      4. intangible asset can be owned, bought, sold or otherwise transferred
      5. these rights or private ownership can be protected on a court of law
      6. Economic phenomena are not intangible assets
   2. 4 categories of Business assets
      1. Real estate
         1. Land
         2. Building components
         3. Building structure
      2. Tangible Personal property
         1. Machinery and equipment
         2. Trucks and autos
         3. Computers
         4. Office equipment
      3. Intangible real property
         1. Leaseholds
         2. Easements and rights of way
         3. Mining and mineral rights
      4. Intangible personal property
         1. General commercial intangible assets
         2. Intellectual property
            1. Patents
            2. exclude others from making, using, or
            3. selling the patented invention or production for a specified duration of time
            4. Trademarks
            5. Copyrights
            6. Trade secrets
         3. Goodwill intangible value
   3. Reasons to conduct an intangible asset valuation
      1. 1. Business has changed
         1. more and more service-oriented
         2. more technology oriented than capital oriented
         3. capital is more intellectual capital than equipment capital
      2. 2. Purpose of the valuation
         1. for transactional purposes
         2. notational purposes
            1. are performed for
            2. accounting
            3. recording
            4. reporting
            5. other informational reasons
      3. Reasons to value an intangible asset
         1. GAAP
         2. a statutory provision
         3. an administrative ruling
         4. a regulatory authority
         5. Allocation of an acquisition purchase price for financial accounting purposes
            1. acquisition purchase price allocation for financial accounting
      4. List of operations / events that need an intangible asset valuation
         1. Transaction price or structuring reasons
         2. Intercompany use and ownership transfer reasons
         3. Financial accounting and fair value reporting reasons
         4. Taxation planning and compliance reasons
         5. Bankruptcy and reorganization reasons
      5. Why is fair value important?
         1. f it sold an asset or might pay to transfer a liability
         2. fair value measurements
            1. Derivatives and non derivative financial assets and liabilities
            2. Assets and liabilities
            3. Asset retirement obligations
            4. Impairment of intangible or long-lived assets
            5. Liabilities for exit and disposal activities
            6. Guarantees
            7. Real estate held for sale
   4. Intangible asset valuation principles
      1. Rules to respect
         1. define the purpose and the objective
         2. ppropriate standards of value, the appropriate premise of value
         3. describe the intangible asset, the bundle of legal rights
         4. the appropriate valuation date
         5. valuation assignment in a client engagement letter
   5. Define the valuation assignment
      1. objective of the analysis
         1. specific intangible asset
         2. ownership interest
         3. standard and premise of value
         4. “as of” valuation date
      2. purpose of the analysis
         1. audience of the valuation
         2. decisions
            1. will be influenced by the results of the analysis
   6. Selecting the appropriate standard of value
      1. Fair market value
         1. the price
            1. hypothetical willing buyer will pay to a hypothetical willing seller with neither being under undue influence to transact
      2. Fair value
         1. the Price
            1. would be received to sell an asset
            2. paid to transfer a liability in an orderly transaction between market participants at the measurement date
      3. Acquisition value
         1. the price
            1. a specifically identified buyer would be expected to pay for an intangible asset with consideration given to any intangible asset unique economic benefits to the identified buyer
         2. Strategic value
         3. What is the greatest price that an identified buyer can afford to pay for the intangible asset, given that buyer’s unique set of circumstances.
4. Methodology Recap
   1. Relief from royalty
      1. applications
         1. brand
         2. technology
         3. know-how
      2. key inputs
         1. 1. revenue forecast
         2. 2. expected life
         3. 3. royalty rate
         4. 4. discount rate
   2. excess earning
      1. applications
         1. customer relationship
         2. vendor relationship
         3. technology
         4. licenses
         5. order backlog
         6. IPR&D
      2. key inputs
         1. 1. revenue forecast
         2. 2. expense
         3. 3. expected life
         4. 4. future tax rate
         5. 4. tax amortisation rate
         6. 5. controbutory asset charges
         7. 6. discount rate
   3. cost
      1. applications
         1. licenses and permits
         2. certifications
         3. internally-generated software
         4. workforce
      2. key inputs
         1. 1. all cost
         2. 2.ajusement factors toreduce cost
   4. with or without
      1. applications
         1. non-competition agreements
         2. franchises
         3. processes
         4. techonolohies
      2. key inputs
         1. 1. free cash flow with asset
         2. 2. discount rate
         3. 3. expected life
         4. 4. free cash flow excluding asset
         5. 5. discount rate excluding asset
         6. 6. expected period to replace asset+costs
         7. 7. tax amortisation benefit
   5. green field
      1. applications
         1. non primary income generating assets
         2. licenses and permits
         3. rights
         4. franchise agreement
      2. key inputs
         1. 1.sart-up cash flow with capital cost
         2. 2. expected ramp-up period and pattern
         3. 3. start-up-type discount rate
         4. 4. tax amortisation benefits