woodward workshop.pptVIP

Valuing intangible assets and impairment testing in the pharmaceuticals industry Caroline Woodward11 March 2003 Content Introduction Identification of intangible assets Estimating the useful life of intangible assets Valuation methodologies Requirements of various accounting standards (UK/US/IAS) Impairment testing Requirements Approaches Documentation Introduction Purpose of this session is To provide a general grounding in intangible assets To introduce the main methods of valuing intangibles and when to use them To outline the accounting requirements that govern most formal valuations To give you an understanding of impairment and why it will affect the everyday management of your business Intangible Assets Identification Lifing Valuation Intangible assets defined According to Valuation of Intellectual Property and Intangible Assets, Second Edition, by Gordon V. Smith and Russell L. Parr, 1994, (“Smith and Parr”), page 83: “intangible assets are all the elements of a business enterprise that exist in addition to working capital and tangible assets. They are the elements, after working capital and tangible assets, that make the business work and are often the primary contributors to the earning power of the enterprise. Their existence is dependent on the presence, or expectation, of earnings” Intangible assets defined Intellectual Capital Knowledge with potential for value (i.e. ideas embodied in people, processes, and customers) Intellectual Asset Knowledge providing value “working” (i.e. licensed patents, implemented know-how) Intellectual Property Knowledge articulated with legal ownership (i.e. patents, trademarks, copyrights, trade secrets) Characteristics of intangible assets They are capable of legal enforcement and also of legal transfer of ownership They are capable of producing revenues in their own right The assets are capable of generating additional resources / cash flows / profits over and above those which the business would oth