Intangible

Assets
Presented by Group K
What Is an Intangible Asset?
● An intangible asset is an asset that is not physical
in nature. Goodwill, brand recognition and
intellectual property, such as patents, trademarks,
and copyrights, are all intangible assets.
● Intangible assets exist in opposition to tangible
assets, which include land, vehicles, equipment,
and inventory.
● Additionally, financial assets such as stocks and
bonds, which derive their value from contractual
claims, are considered tangible assets.
● Businesses can create or acquire intangible
assets. An intangible asset can be considered
indefinite (a brand name, for example) or definite,
like a legal agreement or contract.
● Intangible assets created by a company do not
appear on the balance sheet and have no
recorded book value.
● An intangible asset can be classified as either
indefinite or definite. A company's brand name is
considered an indefinite intangible asset because
it stays with the company for as long as it
continues operations.
● An example of a definite intangible asset would
be a legal agreement to operate under another
company's patent, with no plans of extending the
agreement. The agreement thus has a limited life
and is classified as a definite asset.
● While an intangible asset doesn't have the
obvious physical value of a factory or equipment,
it can prove valuable for a firm and be critical to
its long-term success or failure.
● Intangible assets are an important source of
strong competitive advantage for business and
central to creating customer value, as well as
shareholder/stakeholder value.
 Why Goodwill exists and how it
is calculated?
Basic Calculation: Equity Purchase Price - Seller’s Common shareholders Equity + Seller’s
existing goodwill +/- other adjustments to Seller’s Balance Sheet

Example: Company A pays $1000 in cash to acquire

company B. Company B has $1500 in
assets, $600 in liabilities and common
equity of $900.

In this case, the Balance Sheet will go out

of balance immediately after the deal
closes because if the Buyer spends $1000
in Cash, its Assets side will increase by
$500 total ($1500 increase in Assets from
the Seller, and $1000 decrease from the
Cash usage), and its L&E side will increase
by $600 due to the Seller’s Liabilities.
To fix this imbalance, 2 new assets are created in M&A deals:
Goodwill and Other Intangible Assets. In M&A deals, buyers are
required to revalue everything on the seller’s Balance Sheet.

Note: If an item increases Assets or reduces Liabilities, that means less Goodwill is
needed to boost Assets – so we subtract that item. So we subtract Asset Write-Ups
as well as Liability Write-Downs such as the DTLs that get eliminated.
❏ Depreciation on PPE for Final Balance Sheet
Company B - 5%
❏ Purchase Price to allocate is
basically the total allocable
purchase premium
❏ % allocated to other
intangible assets - 20%
❏ Buyer’s Tax rate - 25%
❏ Deferred tax liability is a
write up of both the
depreciation and
amortisation values, times
the buyer’s tax rate
because they won’t be
deducted for cash tax
purposes. Therefore, it is
calculated that represents
the difference between
book value and cash taxes in
future years
Valuation of
intangible
assets
Relief from
royalty
The RRM calculates value based on
the hypothetical royalty payments
that would be saved by owning the
asset rather than licensing it. The
rationale behind the RRM is fairly
intuitive: Owning an intangible
asset means the underlying entity
doesn’t have to pay for the
privilege of deploying that asset.
The RRM is often used to value
domain names, trademarks,
licensed computer software, and
in-progress R&D that can be tied
to a specific revenue stream and
where data on royalty and license
fees from other market
transactions are available.
 Steps to valuation
Estimating
01 Projections 02
royalty rates
Projecting financial information
for the overall enterprise, Estimating a suitable royalty
including revenue, growth rate for the intangible asset
rates, and tax rates and based on an analysis of royalty
estimates. The underlying data rates from publicly available
is generally obtained from the information for similar domain
entity’s management. names and of the industry in
question.
03 Valuing 04 Expected
assets projection
Estimating the useful life of the Estimating a discount rate for
asset. the after-tax royalty savings
Applying the royalty rate to the and discount to present value.
estimated revenue stream
With or without
method
WWM YOUR
LOGO

The WWM estimates an

intangible asset’s value by
calculating the difference
between two discounted cash-
flow models: one that represents
the status quo for the business
enterprise with the asset in
place, and another without it.
The WWM is often used to value
noncompete agreements.
 2000
Our history
Jupiter is the
biggest planet

2005 2010

Venus has a Mars is red,

beautiful name but is cold
Our history
And still going
strong!

2015 2020

Jupiter is the Jupiter is the

biggest planet biggest planet
 Multi-period excess earnings
method

A valuation technique for measuring the fair value of intangible

assets.

An intangible asset’s fair value = the present value of the

incremental after-tax cash flows (excess earnings) attributable
solely to the intangible asset over its remaining economic life.

Projected cash flows are isolated from the projected cash flows
of the combined asset group.
 PROCESS

NPV of tax benefits

Contributory asset
associated with amortization
charges are then deducted
added to arrive at the
from the total net
intangible asset’s
after-tax cash flows
fair value

An estimate of the Excess cash flows are

expected net income of a then discounted to a net
particular asset group present value
Replacement Cost
Estimates the fair value of an asset by
Method approximating its depreciated replacement cost,
which would include all costs necessary to
construct a similar asset of equivalent utility at
prices applicable at the time of reconstruction.

Frequent Applications

● Licenses and permits

● Certifications
● Internally-generated software
● Workforce

The cost approach is based on the

premise that a prudent third-party
purchaser would pay no more for
an asset than its replacement cost.
PROCESS
Historical cost reflects only the actual
cost that had been incurred to develop
the asset.

Reproduction cost new implies the

current cost of an identical new property.

Replacement cost new implies the

current cost of a similar new property
having the nearest equivalent utility to
the property being valued.
 Thank
You!
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Parts of the company

Neptune is the farthest

Neptune planet from the Sun. It’s the
fourth-largest by diameter

Jupiter is the biggest planet

Jupiter in the Solar System and the
fourth-brightest object

Mars is actually a cold place.

Mars It’s full of iron oxide dust,
giving the planet its red cast
Our locations

Subsidiary Central
Venus has a Jupiter is the
beautiful name biggest planet
02
Our services
Bulleted list

● Mercury is the closest planet

● Venus has a beautiful name
● Saturn is the ringed one
● Neptune is the farthest planet
● Jupiter is the biggest planet
Look at this
picture!

Images reveal amounts

of data. So remember:
use an image instead of
a long text
Our philosophy
Mission
Despite being red,
Mars is a cold place. It’s
full of iron oxide dust

Vision
Jupiter is a gas giant
and the biggest planet
in the Solar System

Values
Mercury is the closest
planet to the Sun and
the smallest one
“This is a quote, words full of
wisdom that someone
important said and can make
the reader get inspired”

—Someone Famous
A picture is worth a
thousand words
Our services
Venus Neptune
Venus has a Neptune is the
beautiful name farthest planet

Jupiter Mercury
It’s the biggest Mercury is the
planet of them all smallest planet

Saturn Mars
It’s a gas giant Despite being
and has rings red, Mars is cold
Best sellers
01
Saturn is the ringed
one and a gas giant 02
Neptune is the
farthest planet
03
It’s the biggest planet
in the Solar System
Awesome
words
Our strengths
Loyalty Efficiency
Neptune is the farthest Despite being red, Mars
planet from the Sun and is a cold place. It’s full of
the fourth-largest one iron oxide dust

Reliability Commitment
Mercury is the closest Jupiter is the biggest
planet to the Sun and planet and the fourth-
also the smallest one brightest one
Customer profile
Basic Info Resume
Age Range Mercury is the closest planet to the
25 35 Sun and the smallest one—it’s only
Occupation a bit larger than the Moon
Freelance Employed

Interests Buying Method

Sports
10% Online
Finance 20% Offline
30% Dropship
Tech 30%
40% By phone
$293,632
Investment on
new technologies
Our numbers
Venus
It has a beautiful
name

Saturn
It’s the ringed one

Mercury
Mercury is small

Jupiter You can edit this graph with your

Jupiter is the biggest own data, just click on it and edit the
sheet
Our growth this year

1,000 30,000 200,000 400,000

Venus has a Mercury is Saturn is the Jupiter is the

nice name the smallest ringed one biggest one
Future projects

Project 1 Project 2 Project 3

Venus has a beautiful Despite being red, Mars Mercury is the closest
name, but it’s terribly hot is a very cold place planet to the Sun
Customer testimonials

Jenny “Mercury is the closest planet to

Doe the Sun and the smallest one”

Charlie “Venus has a beautiful name and is

Watson the second planet from the Sun”

Helen “Despite being red, Mars is a very

Roe cold place”
Awards
Mercury Mercury is the closest planet
to the Sun and the smallest
one in the Solar System

Venus Venus has a beautiful name

and is the second planet
from the Sun of all

Jupiter Despite being red, Mars is a

very cold place. It’s full of
iron oxide dust
Our team

John Doe Amy Adams David Cliff

Here you can talk a bit Here you can talk a bit Here you can talk a bit
about this person about this person about this person
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Alternative infographics Mercury +8%

Neptune
Earth Earth
Venus 50% Mars Mars
Venus Venus
Mars 10%
70%
Earth

7 8
6 6
3
2

$568
Mars Earth
Earth is where
we all live on
1 2 3 4 5 6 7
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