Valuation of Intangible Assets in Global Operations

Valuation of Intangible Assets in Global Operations

Valuation of Intangible Assets in Global Operations

Valuation of Intangible Assets in Global Operations

Synopsis

The valuation of intangible assets has become a central issue in the practice of management. When companies undertake alliances or licensing agreements, effect mergers, sell or purchase brands, or evaluate R&D projects, a key issue is how each party puts a financial value on the intangible contribution. Valuations also have a tax implication, particularly in transnational operations. The contributors, including academics from five nations and expert practitioners from leading accounting and consulting companies, cover intellectual property strategy of global firms, valuation of human capital, and valuation techniques for the transfer or sale of brands, licenses, and other intangible assets.

In addition, the contributors address the special needs of the software and pharmaceutical sectors in separate chapters. This book includes tools, metrics, and models that are of interest to academics as well as global executives. Recommended for valuation experts, scholars, international tax specialists, executives (especially those involved in alliance negotiations, brand equity, mergers and acquisitions, divestitures, and intellectual property management), and officials in such supranational institutions as the EU, OECD, UNCTAD, WTO, IMF, and World Bank.

Excerpt

In the twentieth century mankind made a transition from a matter-based economy to one based on ideas, from an emphasis on natural resources to thought, design, and organization. the things of the spirit were beginning to be recognized as the more weighty aspects of life. a unit of gdp literally weighed less each successive year, over much of the last century, in a majority of nations. There were two reasons. First, services displaced manufacturing as the major component of economic activity. Second, manufactured items themselves were designed leaner—or, more precisely, could produce larger quantities of output from the same or a lighter design.

Many years ago, in a Singapore department store, I saw displayed two toaster ovens. One was a mechanical model for $25. the other, a similar one, had a microprocessor built into it and sold for $27. If anything, the latter weighed less. the $2 increment in value reflected purely the embedded thought of the electronics designer. As companies undertake designs, spend billions in R&D, and create corporate knowledge, how is this knowledge to be valued? This question is relevant not only to value the company itself. Increasingly, selected bits of corporate knowledge are being separated and sold, licensed, or shared with other companies in alliance relationships. Let us suppose another appliance company wanted to license the microprocessor design for the toaster oven. How much should it pay? in a typical alliance, such as a licensing agreement, the licensee receives a package comprising legal rights (e.g., patents), unpatented but proprietary designs, and services such as training from the licensor on efficient manufacturing and organization—a bundle of intangibles and services which has to be valued or priced.

The de-materialization of the economy had advanced, by the end of the twentieth century, to the point where 79 percent of jobs and 76 percent of the gnp

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