Brand Valuation

Brand Valuation

What impacts the enterprise value except for tangible fixed assets is non-tangible assets, including mainly trademarks, corporate marks, know-how and patents. A proper valuation of brand or another non-tangible asset may considerably influence an effective sale of entity or business operation cost optimization. Purchasing or sale of non-tangible assets is more and more common. It may significantly affect the business results. A well-recognized name or logo and general brand awareness among public members ensures significantly better results than those of your competitors. Know-how is also a non-tangible asset and when an entire enterprise is sold, it may considerably increase the profit by giving access to an asset that has not been available before. Therefore, correct valuation of such assets is nowadays relevant, whereas requirements of the Accounting Act or International Reporting Standards may necessitate that companies conduct valuations that will be revealed in non-tangible assets balance sheet.

For example, the income-based valuation, i.e. releasing a company from license fees, is the most common to assess the value of a trademark. This method is based on the assumption that possession of a brand or trademark generates savings for the company on possible license fees that the company would have to pay if the trademark was licensed from another entity. This method consists in valuation of future revenues that the brand or trademark will generate and calculation of possible future license fees by application of license fee rates for similar brands. The brand-related revenues generated this way are recalculated by applying a discounting ratio as at this day, which will give you the current value of the trademark.