Methods and Applications
Edited by Federico Munari and Raffaele Oriani
Chapter 5: Traditional Valuation Methods: Cost, Market and Income Approach
Heinz Goddar, Ulrich Moser 5.1 INTRODUCTION The valuation of intangible assets is playing an ever greater role in valuation practice nowadays. One of the main reasons for this increasing importance is related to fundamental changes that have occurred in accounting standards (see Chapter 11), particularly those concerning the treatment of business combinations (especially IFRS 3) and the impairment of assets (especially IAS 36). Moreover, as discussed in Chapter 1, the valuation of intangible assets (and patents in particular) has become increasingly important in a variety domains, such as internal business decisions, access to external financing, licensing transactions or litigation. This chapter presents the traditional and most commonly used valuation methods for patents, based on the cost, market and income approaches. We will refer mainly to the valuation of patents and patented technologies, although the methods presented here might be applied also to other types of assets, such as trademarks. This chapter is organized as follows. Firstly we will discuss the theoretical principles involved in the valuation of patents. To this purpose, we will initially present some of the basic principles of financial valuation in so far as they are relevant for this chapter and then we will present an analysis of the specificities of patents and patented technologies that are relevant for financial valuation. Secondly, we will introduce the three approaches which are more frequently applied in the context of patent valuation: the cost, the market and the income approach. Finally, we will discuss in more depth those aspects of...
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