The management of intellectual capital is conceptualised as occurring via a multiple stage process, governed by an evolutionary logic.
Human capital is inherent in people and cannot be owned by an organization. Nevertheless, the role of intellectual property rights IPRs and intangible assets in business is insufficiently understood. There are four main value concepts, namely, owner value, market value, fair value and tax value.
With the asset you are considering, the valuer will need to consider the operating environment of the asset to determine the potential for market revenue growth.
The presence of an asset is a function of its ability to generate a return and the discount rate applied to that return. For a better understanding of the IPRs of a company, some of the questions to be answered should often be: The basis of market value is the assumption that if comparable property has fetched a certain price, then the subject property will realize a price something near to it.
This is not only due to lack of compatibility, but also because intellectual property is generally not developed to be sold and many sales are usually only a small part of a larger transaction and details are kept extremely confidential.
It must also be Intellectual capital valuation that in many situations after examining these lives carefully, to produce cashflow forecasts, it is often not credible to forecast beyond say 4 to 5 years.
Process capital includes the techniques, procedures, and programs that implement and enhance the delivery of goods and services. For example, a Intellectual capital valuation is arrived at after assessing a brand in the light of factors such as leadership, stability, market share, internationality, trend of profitability, marketing and advertising support and protection.
For the value of intangible assets, calculating the value of intangible assets is not usually a major problem when they have been formally protected through trademarks, patents or copyright.
Valuation is, essentially, a bringing together of the economic concept of value and the legal concept of property. However, the fact that the legal life of a patent is 20 years may be very important for valuation purposes, as often illustrated in the pharmaceutical sector with generic competitors entering the marketplace at speed to dilute a monopoly position when protection ceases.
The potential will need to be assessed by reference to the enduring nature of the asset, and its marketability, and this must subsume consideration of expenses together with an estimate of residual value or terminal value, if any. Accounting standards are generally not helpful in representing the worth of IPRs in company accounts and IPRs are often under-valued, under-managed or under-exploited.
The fair value concept, in its essence, is the desire to be equitable to both parties. Because of its diverse components, structural capital can be classified further into organization, process and innovation capital.
The cardinal rule of commercial valuation is: Methods for the Valuation of Intangibles Acceptable methods for the valuation of identifiable intangible assets and intellectual property fall into three broad categories.
This method recognizes market conditions, likely performance and potential, and the time value of money. Finding generic equivalents for a patent and identifiable price differences is far more difficult than for a retail brand. Who owns it could I sue or could someone sue me? Human capital also encompasses how effectively an organization uses its people resources as measured by creativity and Innovation.
Exploitation of IPRs can take many forms, ranging from outright sale of an asset, a joint venture or a licensing agreement.
How may it be better exploited e. Inevitably, exploitation increases the risk assessment. It is often the key objective in mergers and acquisitions and knowledgeable companies are increasingly using licensing routes to transfer these assets to low tax jurisdictions.
Strategic Alignment, Exploration and Exploitation, Measurement and Reporting of intellectual capital . This rule is particularly significant as far as the valuation of intellectual property rights is concerned. The excess profits method looks at the current value of the net tangible assets employed as the benchmark for an estimated rate of return.
This process is necessary because, just like any other asset, IPRs have a varying ability to generate economic returns dependant upon these main lives. These methods look at the differences in sale prices, adjusted for differences in marketing costs. The royalty stream is then capitalized reflecting the risk and return relationship of investing in the asset.
The projection of market revenues will be a critical step in the valuation. DCF mathematical modelling allows for the fact that 1 Euro in your pocket today is worth more than 1 Euro next year or 1 Euro the year after. Management obviously need to know the value of the IPR and those risks for the same reason that they need to know the underlying value of their tangible assets; because business managers should know the value of all assets and liabilities under their stewardship and control, to make sure that values are maintained.So, how can we measure intellectual capital?
And how can we assign a value? In my opinion there is an important issue about intellectual capital and valuation but from "money" perspective. For. Models of IC Valuation Page 7 of 33 Development of the IC Concept The development of intellectual capital reports, can be traced back to the desire for individuals working with or within businesses to improve their understanding of what comprised the value of the business so as to manage better those things that generate value (Petty & Guthrie.
Methods of Intellectual Property Valuation This note addresses the methods used in valuing intellectual property, with particular emphasis on valuing patents.
Additionally, the note defines intellectual property and explains its The Venture Capital valuation technique also derives a value for a patent from the cash. Capital Valuation Paper YOUR NAME COURSE Instructor NAME DATE Capital Valuation Paper A business valuation of a company, especially one the size of Target, is a mystery but is often an integral part of planning, decision-making, strategic assessment, and maybe an equitable resolution to a touchy concern.
Knowing what a business is worth. 79 ISSN EKONOMIKA Vol. 92(2) INTELLECTUAL CAPITAL VALUATION: METHODS AND THEIR CLASSIFICATION Agnė Ramanauskaitė*, Kristina Rudžionienė Vilnius University Kaunas Faculty of Humanities, Lithuania.
Kelvin King, founding partner of Valuation Consulting 1. Intellectual capital is recognized as the most important asset of many of the world’s largest and most powerful companies; it is the foundation for the market dominance and continuing profitability of .Download