Guide to Intangible Asset Valuation, Revised Edition

1 Identification of Intangible Assets 1

2 Identification of Intellectual Property Assets 19

3 Reasons to Conduct an Intangible Asset Valuation 45

4 Reasons to Conduct an Intangible Asset Damages Analysis 59

5 Intangible Asset Valuation Principles 71

6 Intellectual Property Valuation Principles 99

7 Intangible Asset Damages Principles 111

8 Valuation Data Gathering and Due Diligence Analysis 133

9 Damages Due Diligence Procedures 147

10 Structuring the Intangible Asset Analysis Assignment 161

11 Intangible Asset Valuation Process 171

12 Intangible Asset Economic Damages Process 179

13 Highest and Best Use Analysis 209

14 Cost Approach Methods and Procedures 219

15 Cost Approach Valuation Illustrative Example 237

16 Market Approach Methods and Procedures 257

17 Market Approach Valuation Illustrative Example 287

18 Income Approach Methods and Procedures 295

19 Income Approach Valuation Illustrative Example 369

20 Valuation Synthesis and Conclusion 403

21 ASC 820 and Fair Value Accounting 415

22 ASC 805 and Acquisition Accounting 429

23 Fair Value of Intangible Assets Not Acquired in a Business Combination 459

24 Fair Value Accounting Goodwill 471

25 Intellectual Property 485

26 Contract Intangible Assets—continued Valuation Methods 520

27 Customer Intangible Assets 537

28 Data Processing Intangible Assets 579

29 Human Capital Intangible Assets 627

30 Licenses and Permits 643

31 Technology 661

32 Engineering 679

33 Goodwill 697

34 Reporting the Results of the Intangible Asset Analysis 719

Selected Bibliography 729

Index 737

Robert F. Reilly is a managing director in the Chicago office of Willamette Management Associates, a business valuation, forensic analysis, and financial opinion firm. Prior to joining the firm in 1991, he was a valuation services partner for accounting firm Deloitte & Touche. Robert specializes in the valuation of businesses, securities, and intangible assets for transaction, taxation, accounting, financing, and litigation purposes. He also specializes in economic damages analysis, license and other royalty rate analysis, and intercompany transfer price analysis related to intangible assets and intellectual property. He is a CPA, chartered financial analyst, certified management accountant, and chartered global management accountant, and he is accredited in business valuation and certified in financial forensics. He is also a certified business appraiser, certified valuation analyst, certified valuation consultant, certified review appraiser, certified real estate appraiser, and state-certified general appraiser. Mr. Reilly serves in an editorial capacity for several professional journals, including Valuation Strategies, ABI Journal, Journal of Accountancy, and Construction Accounting and Taxation. He received his BA in economics and his MBA in finance from Columbia University. He is an inductee into the AICPA business valuation Hall of Fame.

Robert P. Schweihs is a managing director in the Chicago office of Willamette Management Associates. Before joining the firm in 1991, Bob was a partner and national director of valuation services at the accounting firm Deloitte & Touche. Bob’s practice includes intellectual property valuation, economic damages, and intercompany transfer price analyses. These analyses are performed for both transactional and notational purposes and relate to license royalty rate estimation, purchase accounting, financing, securitization and collateralization, joint venture formation and transactions, taxation planning and compliance, not-for-profit entity regulatory compliance, structuring commercialization and exploitation programs, and infringement claims and other types of commercial litigation matters. He has testified before federal, state, and local courts. Bob holds a BS in engineering from the University of Notre Dame and an MBA in finance and economics from the University of Chicago Booth School of Business. He is an accredited senior appraiser designated in business valuation and a certified business appraiser.