Beacon Valuation Group LLC

Intangible Asset Valuations

Fair Value Reporting Valuations


Fair value reporting is an important part of financial disclosure. During this process, companies must determine the fair value of assets and liabilities at the date of acquisition and subsequently test for impairment after that. Additionally, certain entities must also mark-to-market their investments on a quarterly basis.


There are detailed rules surrounding fair value accounting (Financial Accounting Standards Board Topic 820, formerly FAS 157), but it can be a complex task to assess and apply them accurately. While problems can arise when determining the fair value of tangible assets, applying the rules to intangible assets greatly increases the complexity.


The application of accounting pronouncements for the valuation of intangible assets can be quite ambiguous. Also, performing fair value reporting quarterly on a marked-to-market basis can also be challenging and time consuming. In all cases, a thorough understanding of accounting valuation techniques and experience is crucial.


Purchase Price Allocations

Beacon provides purchase price allocation ("PPA") valuations for financial reporting purposes, in accordance with ASC 805 (formerly SFAS 141R) and ASC 820 (formerly SFAS 157).  PPAs entail allocating the total purchase price in an acquisition to the acquired tangible and intangible assets that are recognized separately from goodwill, based upon a rigorous determination of their fair values. The analysis includes an estimation of asset remaining useful lives.

The benefits of a Beacon PPA include: 

          1. Tailored valuation approach based on business context and Beacon’s industry expertise. 
          2. Knowledge of the SEC’s key areas of concern.
          3. A deliverable for presentation to the Client's auditors, including Big-Four accounting firms, and the SEC.
          4. Pre- and post-deal analysis and advice.
          5. Rapid mobilization of Beacon’s resources. 
          6. Management assistance with seller negotiations.

Beacon helps you meet market and regulatory requirements.


Impairment Testing


Economic conditions can have a significant impact on valuations. As complex rules related to fair value reporting continue to attract regulatory scrutiny, dealing with the complexities of ASC 350 and impairment testing may require your business to draw upon our significant technical and industry experience.


Not only can problems arise due to the difficulty in determining the fair value of an enterprise subjected to impairment testing, but also in understanding, developing and supporting the market participant assumptions. These challenges are also present when testing indefinite-lived intangible assets such as trade names.


When you need assistance with impairment testing, and complying with the requirements of ASC 350, 350-20, 350-30 and ASC 360, the valuation professionals at Beacon can help. We’ll accurately and cost-effectively help you with your qualitative or quantitative analysis and work closely with you and your external auditor to produce a reasonable valuation for your impairment determination.


Technology-based Intangibles Valuation


Valuations of technology-based intangibles, which may include patents, existing or IPR&D technologies, and proprietary technological know-how, are performed principally for financial reporting purposes. Beacon has significant expertise in valuing technology-based intangibles in a wide range of industries.

Analysis is done in accordance with ASC 820 (formerly SFAS 157), ASC 805 (formerly SFAS 141R) and AICPA guidelines. 
 
           1. Multi-period Excess Earnings Method or Relief-from-royalty Method within the Income Approach are generally employed. 
           2. Analysis reflects appropriate contributory asset charges, royalty rates, risk factors, and other market-participant assumptions.

           3. Quantitative and qualitative approaches are used to compute the discount rate.


Corporate Brand Valuation


Corporate brands are highly valuable assets and their values are becoming increasingly important in a variety of corporate transactions and activities.  The tracking of corporate brand values on an ongoing basis can benefit management internally and be used as a strategic planning and evaluation tool aimed at maximizing value for the company’s stakeholders.  Value-based corporate brand tracking systems can also be used as a means of monitoring marketing efficiency, improving marketing budget allocation, and highlighting marketing’s contribution to the bottom line in financial terms.


Beacon Valuation Group’s proprietary Corporate Brand Valuation methodology is designed to explore the relation between a business enterprise, its underlying key intangible assets, goodwill, and ultimately, corporate brand value. The valuation of corporate brand, perhaps the most esoteric of all assets held by a corporation, is a function of thoroughly identifying, isolating, and quantifying the economic value of that complex array of forces that make up corporate brand.  In many cases, these forces may be dominated and led by the intangible assets held by the enterprise.  In all cases, it must be recognized that a corporate brand would not exist were it not for the presence of the elaborate combination of elements embodied in the intangible assets unique to and held by the enterprise being examined.


Section 482 Transfer Pricing Analysis (IP Transfers)


Transfer pricing takes place within non-arm’s-length transactions, generally between subsidiary and parent company.  In Section 482 of the Internal Revenue Code, the IRS requires that such transactions be consummated under an arm’s length standard. Therefore, transfer charges between related entities should be determined by at least the following three methods:


          1. Comparable uncontrolled transaction (“CUT”) method;
          2. Comparable profits (“CP”) method; and
          3. Profits split (“PS”) method

Frequently, however, especially when the transfer of intellectual property involves a newly formed domestic or off-shore entity (“Newco”), the CP or PS methods may not be the most appropriate approaches to pursue.  Given the short operating history of the Newco, any precedent for the Company’s relevant transactional profitability, even if available, could not be considered as exhibiting representative profitability, since there exists no history to which a comparison for reasonableness could be made.  Beacon’s thorough analysis of the entities’ unique transfer, tempered by our rigorous and systematic utilization of the most appropriate method(s) and our examination of the most relevant market transactional data, is designed to ensure that our clients remain in accordance with the guidelines of Section 482, whether dealing with intangibles such as technology and patents, or trade secrets and know-how.