When transferring intangible assets between related entities, local tax regulations often require support for the arm’s length nature of the transfer price. For this purpose, it is recommended to perform an independent valuation study. A valuation report sets out the fair market value of the intangible asset and can be used to justify the arm’s length nature of the transfer value towards tax authorities, auditors and/or internal stakeholders. Furthermore, a valuation report may be used in an early/planning phase to determine the viability or feasibility of a transfer.
The valuation of individual intangible assets may be challenging. Although there are valuation methods available, the valuation assumptions required by those methods are often hard to determine. There are often no third party transactions that can validate the assumptions or provide comfort whether the value arrived at through a valuation method actually makes sense. From our experience a valuation study of intangible assets is as much an analysis as it is a joint process with the client. Discussions with and feedback from the clients are often as important as the financial input used for the analysis. Understanding the value story behind an intangible asset is crucial in the valuation analysis.
Embridge has extensive experience with valuation of intangible assets for tax and accounting purposes and has performed valuations of many types of intangible assets in a broad range of industries. For more information please contact: