Intangible assets are becoming an increasingly important part of modern society’s business landscape. The reason for this is that more and more newly created value is being developed through knowledge rather than material resources and production labor.
We provide intangible asset valuation services in accordance with the Regulation on the Methodology for Valuation of Property (Official Gazette of Montenegro no. 64/18).
Intangible investments or intangible assets such as brands/trademarks, patents, licenses, goodwill, etc., can be assessed using the following valuation approaches:
- Cost approach
- Market approach
- Income approach
The cost approach is based on the principle of substitution, assuming that a rational buyer will not pay more for a specific asset than it would cost to obtain a similar asset with the same utility value.
The market approach relies on direct comparison of sales prices and/or offered prices on the market for assets with similar characteristics, or by comparing the market value of a business entity with the market value of comparable business entities.
The income approach to valuation is based on the principle of anticipation. According to this principle, a typical investor/buyer in the market will only invest in assets/capital from which they expect future inflows or benefits.
Before deciding which valuation method is applicable for a specific intangible asset under evaluation, authorized appraisers at HLB Mont Audit consider the following:
- Definition of the intangible asset in accordance with the law and international standards, and whether the subject asset meets the criteria for identification and recognition of intangible assets (separability or arising from contractual or other legal rights, controlability, or ability to derive benefits from the subject asset);
- If the valuation is for financial reporting purposes, it must comply with International Accounting Standard 38 – Intangible Assets.
- The category to which the intangible asset belongs, and the methodology prescribed for that category:
– Marketing-related intangible assets category;
– Customer-related intangible assets category;
– Contract-based intangible assets category;
– Technological intangible assets category; or
– Art-related intangible assets category.
- Useful life of the intangible asset and whether the subject intangible asset has a limited or unlimited lifespan;
- Any rights, privileges, or conditions related to the intangible asset under assessment;
- Availability of trading data for the same or similar intangible assets;
- Future economic benefits (revenues or cost savings) that the owner can derive from the specific intangible asset, and the risk or probability of realizing such future economic benefits based on control or ownership of the intangible asset;
- Information on acquisition or creation costs of the intangible asset, and similar details.