Valuation of Intangible Assets

What is intangible capital? Does it have any value?

• Intangible capital consists of all the elements that do not have a physical component and that contribute to the operation and development of the company. 
• They may be of very different types: commercial (trademarks, business models, marketing), production (inventions, industrial secrets), intrinsic to the company (corporate reputation), etc. 
• The value of intangible capital is not always reflected in the balance sheet of the company. Few companies attribute it the importance it has. 
• There is no legislation regulating the manner in which to value intangible assets. 
• However, ignoring these assets can result in serious detriment to the company’s activity. 

Why should a company’s intangible capital be valued

• To have a record of all the intangible assets belonging to the company or, alternatively, to ascertain the value of a particular intangible asset that is of specific interest. 
• To negotiate licence or assignment agreements with knowledge of the value of the licensed or assigned asset. 
• To obtain financing based on intangible assets. 
• To be able to decide on the company’s strategy based on elements that differentiate it from the competition. 

And if it is so complicated, how is it valued?

• There exist national and international valuation standards that H&A employs in its appraisals. 
• The experience of our professionals and a multidisciplinary team allows us to provide high value appraisals. 
• There exist valuation methods that are accepted internationally. These methods may be summarised as follows:
  - Market-based, in other words, based on earlier similar transactions.
  - Based on the cost of creating or substituting an intangible asset.
  - Based on revenue, which may, in turn be:

· Capitalisation of historic profits.
· Gross profit differential.
· Extraordinary profits.
· Calculation of savings in royalty payments. 

• At H&A we have developed our own method that we apply to each specific case.