3. The historical cost or replacement cost method
This method is based on the following principle: the value of an intangible asset is at least equal to the investment a company would have to make to develop or reconstitute an alternative or similar asset.
The value of historical or replacement costs is therefore made up of the compilation :
creation costs ;
(in terms of equipment and man-days) ;
intellectual property costs (e.g. patent, trademark and design registrations) ;
development costs (including advertising and marketing costs for brands) ;
which were necessary to build up these assets (not forgetting financial and administrative costs).
This is a method that takes a snapshot at a given moment in...
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The historical cost or replacement cost method
The market method
Bibliography
R. Goldscheider, J. Jarosz and C. Mulhern, Use Of The 25 Per Cent Rule In Valuing IP , LES News, December 2002
Websites
http://www.ipresearch.com/index.htm Intellectual Property Research Associates website, offering information on licensing rates by industry sector.
www.lesi.org Licensing Executives Society website
Acronyms and abbreviations
CAPM: Capital Asset Pricing Model
WACC: Weighted Average Cost of Capital
DCF: Discounted Cash Flow
EBITDA: Earnings Before Interest Taxes and Amortization
ENPV: Expected Net Present Value
ISO: International Organization...
Vocabulary
Due diligence: financial audit
Cash flow: surplus of financial flows generated by the operation of intangible assets.
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