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Valuation of Intangible Assets, Brands, Intellectual Property Rights

Valuation of Intangible Assets, Brands, Intellectual Property Rights:

Intangible asset means an asset that is not in physical nature but have monetary value. Eg – Patents, Copyrights, Brand name, Tradenames, Goodwill and Software.

Valuation of Intangible assets can be performed using:

Market Approach – This approach is considered where active market is available for intangible asset and there is sufficient information available about its price in an arm’s length transaction.

Market approach is used to value software generally, as comparable market transactions are readily available in the active market.

Income approach is the valuation approach that converts expected maintainable future amounts or cash flow into single current amount. Valuation of Intangible asset under income approach is aggregate of present value of expected cash flows or future cost saving by the owner through owning the asset or through license. Expected cash flows or cost saving should be adjusted with the respective expenses and then discounted to compute the present value.

Cost Approach is a valuation approach that reflects the amount that would be required currently to replace the service capacity of an asset. Valuation of intangible asset using the cost approach is based on the principal rule of substitution i.e., the amount that will be required to create a new similar intangible asset as adjusted for any depreciation becomes the value of intangible asset to be valued. Cost method is commonly used to value acquired or internally generated intangible assets like software, technology, assembled workforce, etc. Also, cost approach is generally adopted when market and income approach cannot be applied.

Valuation of Brand:

Brand Valuation can be defined as the process used to calculate the value of a brand or the amount of money another party is willing to pay for it or the financial value of the brand. The concept of Brand Value, although similarly constructed to that of Brand Equity, is distinct.

Brand valuation is the process of estimating the total financial value of a brand. A conflict of interest exists if those who value a brand were also involved in its creation.The ISO 10668 standard specifies six key requirements for the process of valuing brands, which are transparency, validity, reliability, sufficiency, objectivity; and financial, behavioral, and legal parameters.

Valuation of Intellectual Property Rights:

IP valuation is the process of determining the value of intellectual property assets such as patents, trademarks, copyrights and trade secrets. If you plan to buy, sell or license IP, you need to carry out an IP valuation to understand the value of the IP assets in question.

Value from an IP asset is derived through direct exploitation like sale and licensing of the IP or even by not exploiting an IP asset (i.e., by merely owning it), for example, by minimizing the negotiating power of customers, offsetting supplier power, mitigating rivalry, raising barriers to entry by competitors, reducing the threat of substitutes, etc.

Valuation for NPA, IBC, and Liquidation Purposes:

According to the Reserve Bank of India (RBI), the gross non-performing assets in Indian banks, specifically in public sector banks, are valued at around Rs 400,000 crore (~US$61.5 billion), which represents 90% of the total NPA in India, with private sector banks accounting for the remainder.

What Is a Nonperforming Asset (NPA)?

A nonperforming asset (NPA) refers to a classification for loans or advances that are in default or in arrears. A loan is in arrears when principal or interest payments are late or missed. A loan is in default when the lender considers the loan agreement to be broken and the debtor is unable to meet his obligations.

Recent Developments and Ways to Tackle NPA  

Insolvency and Bankruptcy Code (IBC)

Credit Risk Management

Tightening Credit Monitoring 

Amendments to Banking Law to give RBI more power

Stricter NPA recovery

Corporate Governance Issues

Accountability 

Obtaining professional Valuation of the assets of an entity is quintessential for taking an “informed decision making” for any acquisitions under the Insolvency and Bankruptcy Code (IBC). As per the Companies (Registered Valuers and Valuation) Rules, 2017, every valuation under the IBC is to be conducted by a Valuer registered with the IBBI

BC, classifies valuation as “Fair value” or “Liquidation Value”. Fair Value is the estimated realizable value of the assets, if same were to be exchanged between a willing buyer and willing seller on an arm’s length basis, as on the insolvency commencement date. Whereas, Liquidation Value is the estimated realizable value of the assets of the corporate debtor, if the corporate debtor were to be liquidated on the insolvency commencement date”.

Transique Valuation Advisors is a sector agnostic, Valuation firm and holds leadership position in Valuation of Securities or Financial Assets with extensive experience in valuation of assets under IBC. We get the valuation of Real estate and Plant & machinery (through our affiliated entity which is an experienced and renowned valuer in these asset categories).

Liquidation Valuation Definition

Liquidation valuation is the value of a company that is bankrupt or going out of business. It is the value of the company’s assets, according to what they would be worth if they are sold off in order to repay creditors. This is in contrast to going concern value, which assumes the company will continue to operate for the foreseeable future. The difference between going concern value and liquidation value consists of intangible assets and goodwill.

Valuation   for Capital Gains, Partition Cases, Dispute Resolution, Litigations

Capital gain means the profit or gain earned by an individual after selling of capital asset. When the selling price of an asset is more than its purchasing price, capital gain is realised.

There are 2 types of capital gains; short term and long term. Capital gain is calculated on the bases of nature and number of transactions undertaken by an individual in a financial year.

Our Chartered Accountants are specialized in valuation of capital gains and provide up to date valuation of your capital assets. We not only help you in identifying the capital increase or decrease in your property assets but also provide you with details of each transaction related to sale of an asset carried out by you in a financial year.

In every suit for partition the total value of the property, for which the suit is filed has to be ascertained. Out of the total property the share of the plaintiff has to be ascertained and 3/4th of the same shall be taken into consideration for the valuation of the suit.

 

What is a partition suit?

A partition suit is a proceeding instituted by either of the parties when a property dispute arises in the family. Partition Deed is an official document, created either by order of the Court or through negotiation between the parties. Basically, it represents the portion of the property claimed by each of the party.

 

Our dispute resolution consultants specialise in evaluating valuation-related facts and circumstances in the context of corporate transactions, including carve-out situations. We mainly work on the valuation process and/or the valuation methodology used in conventional share deal transactions. Our services span the entire range of valuation practices. We can state our position on any and all valuation-related facts and circumstances in the context of transactions by issuing expert reports or appearing as experts on behalf of disputing parties.

Disputes over the value of a business or other ownership interests are sometimes unavoidable. The accurate assessment of economic impact and value and damages in these legal matters often depends on sophisticated analytic, economic, financial and quantitative analysis.

Our team can advise claimants or defendants on assessing the underlying operational and financial issues. We work efficiently, in each case assigning a hand-picked team that is ideally placed to pursue our clients’ interests. In addition, our subject matter specialists are regularly called as independent experts by arbitrators.

Our respected professionals serve as experts in litigation, bankruptcy, arbitration and mediation in local, state, federal and national courts as well as with international arbitrations. We have quantified damages for loss of business value, disputed business value, warrants and stock options, corporate and securities claims, labor and employment disputes, and lost profits in matters successfully resolved in and out of court.

Our independent, objective written reports and verbal testimony reinforce your legal position. We support you and your attorneys through case assessment strategies and expert reports that quantify economic loss or damages, settlement negotiations and alternative dispute resolution and economic evidence. 

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