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PBL Chapter 7 - Group 3 (KU A)

The document discusses four valuation methodologies for intangible assets: 1) cost approach, 2) market transaction approach, 3) income method (excess earnings), and 4) income method (relief from royalty). It then matches the appropriate valuation methodology for four intangible assets: brands and trademarks are valued using the relief from royalty approach; patents use the relief from royalty approach; customer contracts use an indirect approach; and internally generated computer software uses the cost approach.

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82 views4 pages

PBL Chapter 7 - Group 3 (KU A)

The document discusses four valuation methodologies for intangible assets: 1) cost approach, 2) market transaction approach, 3) income method (excess earnings), and 4) income method (relief from royalty). It then matches the appropriate valuation methodology for four intangible assets: brands and trademarks are valued using the relief from royalty approach; patents use the relief from royalty approach; customer contracts use an indirect approach; and internally generated computer software uses the cost approach.

Uploaded by

mutia rasya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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PBL CHAPTER 7

ASSETS

Lecturer:
Dr. Murtanto, SE, Ak, MSc.

Group 3:

Raisafira Astriani 023001800054


Mutia Rasya Azzahra 023001801148
Saviera Fasha 023001801199

JURUSAN AKUNTANSI
FAKULTAS EKONOMI DAN BISNIS
UNIVERSITAS TRISAKTI
JAKARTA
2021
CASE 7.2
INTANGIBLE ASSETS

Intangible assets The value of intangible assets is important in a knowledge-based economy. The
market value of many listed companies exceeds their book value, reflecting intangible assets which
are not recognised on companies' balance sheets. Such intangible assets include brands, innovation
and customer relationships. Despite the importance of intangible assets, accounting standards
permit only limited recognition of such assets, partially because of the difficulties associated with
reliable measurement. We list below a number of intangible assets and also several approaches
which can be used when valuing intangible assets.

Question Consider the following four valuation methodologies.


1. Cost approach (the after tax cost which would be incurred in reproducing the asset)
2. Market transaction (actual transaction value for identical or similar assets based on an arm's
length market transaction)
3. Income method (excess earnings: the present value of future earnings generated by the
intangible asset net of a reasonable return on other assets contributing to the stream of
earnings)
4. Income method (relief from royalty approach: the present value of the likely future royalty
stream which would be earned from licensing out the intangible asset to a third party)

Step 1 - Difficult Word


1. Permit = Give authorization or consent to (someone) to do something.
2. Associated = (of a person or thing) connected with something else.
Type of Task : Discussion task
Analysis method: Brainstorming

Step 2 - Define the Problem


Which of the above approaches are appropriate for each intangible asset listed below?
- Brands and trademarks
- Patent
- Customer contract
- Internally generated computer software

Step 3 - Main Problem

Looking at the theory given, we need to be able to know which approach is considered to
be suitable for the intangible assets given.

Step 4 - Analyzing the Problem


Must consider which approaches; cost approach, market transaction, income method
(excess earnings), income method (relief from royalty), are suitable for the intangible give;
brands and trademark, patent, customer contact and internally generated computer
software.

Step 5 - Learning Objective


To know appropriate approaches for each intangible asset by this practice.

Step 6 - Problem Solving

Intangible asset Valuation methodology Valuation issues

Brands and Relief from royalty The valuer needs to know: (1) royalty rate,
trademarks approach expressed as percentage of sales (2) the
forecast sales of the intangible (3) the terminal
value of an intangible with definite life (4) the
cost of capital.
The most difficult item is (1) which requires
qualitative and quantitative input from
financial and marketing personnel. However,
all model inputs are subjective and require
experience and judgement in estimation.

Patents Relief from royalty As above, but the patent may have a definite
approach life so an assumption is not necessary.
Customer Indirect approach Relevant assets which contribute to the
contract valuation of the customer contract include
fixed assets, working capital and the brand. A
charge is made for the use of these assets
against the cash flows generated over the
forecast life of each contract. The residual
cashflows after making the charges are then
discounted at the appropriate cost of capital.

Internally Cost approach. Forecast costs must be discounted at


generated Considered the only appropriate cost of capital. The key issue is
computer method which can sourcing the data for costs of development of
software approximate the cost of a the software.
unique set of software not
available in the wider
market place.

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