An Economic Shift
We have witnessed the transition of our economy from a manufacturing-based economy to a knowledge-based economy. Accordingly, the emphasis of appraisals has shifted from tangible property (real estate and machinery & equipment) to intangible assets. In recent years, the overall value attributable to intangible assets has increased and has become more of a focal point for numerous valuation scenarios.
Intangible Assets can be defined as nonphysical assets that grant rights and privileges and has value to the owner. Examples of these intangible assets include Customer Relationships, Patents and Unpatented Technology, Trademarks and Trade Names, Research and Development, and Covenants Not to Compete. The list of intangibles is long, varied, and too extensive to list here.
A subset or category of intangible assets is Intellectual Property, referred to as IP. IP is an intangible asset of the human intellect. The category comprises primarily Trade Names, Trademarks, Patents, R&D, and Copyrights. It is interesting to note that all Intellectual Property are Intangible Assets, but all Intangible Assets are not Intellectual Property.
The purposes for valuing Intangible Assets or Intellectual Property vary widely from the donation of a single piece of intellectual property, start-up valuation, or to the valuation of all intangibles in a merger or acquisition.
The valuation needs of each company are unique and can be very different for small businesses, start-up companies, or large, mature corporations. In many start-up companies, the IP or Intangible Assets are the primary assets of the company and the driver of the business. EAC Valuations follows the standards of the National Association of Certified Valuators and Analysts (NACVA) and the Uniform Standards of Professional Appraisal Practice (USPAP) for all intangible asset appraisal assignments. For IRS-related valuations, the valuation must also be performed by a qualified appraiser, as defined in the 2006 Pension Protection Act and more recently addressed in the Dodd-Frank Act.