Magazine article Security Management

Are Companies Valuing Intellectual Assets?

Magazine article Security Management

Are Companies Valuing Intellectual Assets?

Article excerpt

UNDER SARBANES-OXLEY (SOX), public companies must disclose to the Securities and Exchange Commission matters that may materially affect financial performance. One such matter might be the lapse of a trademark or copy-right into the public domain.

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While SOX does not explicitly require businesses to report the value of intellectual property (IP) or other intangible assets, experts suggest that companies at least be capable of putting a value on IP and assign that value when it is appropriate.

There are cases where reporting IP value is mandatory, however. Under standards issued by the Financial Accounting Standards Board, the value of IP must be listed on a balance sheet when a company is involved in a business combination such as a merger or acquisition, explains Gary Bender, an IP valuation expert at Ernst & Young in San Francisco. It then has to report that value each year thereafter, since expirations, legal judgments, and other factors might change the value.

Bender says that it's good business to have a firm handle on intellectual property and be able to value it. Those numbers can prove useful if, for example, shareholders sue the company, alleging that intangible corporate assets were sold at fire-sale prices. Yet many companies are unprepared or ill-equipped to do so, says Michael Moberly, president of Knowledge Protection Strategies, in Memphis. "In my experience, companies are literally avoiding as best they can putting a value and recording a value," Moberly says. …

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