ip valuation & taxation joyce lui sujit khale. client – novatel wireless inc leader in...
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IP Valuation & Taxation
Joyce Lui
Sujit Khale
Client – Novatel Wireless Inc
Leader in Wireless Broadband industry providing hardware and Software solution
Market cap – 88M Employees – 301 Headquarter in San Diego, CA Major market – North America, Europe IP valuated
Software Patents
Company Statistics
Valuation Methods
Cost approach Market approach Income approach
Cost Approach
The cost approach seeks to measure the future benefits of ownership by quantifying the amount of money that would be required to replace the future service capability of the subject intellectual property.
Since intellectual property is generally not sold in the market like tangible assets, we do not have market prices as a starting point in the application of the cost approach.
Market Approach
The market approach is based on the premise that market transactions of intellectual property indicate value.
Market information can be very useful in analyzing and valuing intellectual property, but it seldom is comprehensive enough to provide the basis for a satisfactory conclusion of value on its own.
Income Approach
The income approach is based on discounted cash flow theory and defines the value of the subject property as the present value of the anticipated net economic benefits to be achieved over the duration of the property’s useful life.
The net income of property over its lifetime is used as the approach.
Client Study
Provides IP content through packaged solution
Valuation All software and IP is valued based on Income
approach method. Difficult to separate IP from products or other IPs
.
Taxation - SFAS 141
Requires purchase price is allocated for all tangible and intangible assets
All intangible assets associated are separated from goodwill.
Taxation - SFAS 142
Further categorization Assets needs to be recognized at unit level Intangibles needs to be recognized as finite-
lived or indefinite-lived Finite assets needs to be amortized Indefinite lived assets are subject to annual
impairment test
Balance Sheet
References
Chaplisky, S. (2003, May). Methods of Intellectual Property Valuation. 1-12. Charlottesville, Virginia: Darden University of Virginia.
Mard, M. H. (2000). Intellectual Property Valuation. Los Angeles.
Singla, A. (n.d.). Valuation of Intellectual Property.