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We are consistently told how hard it is to do accurate, meaningful balance sheet valuations for intellectual property and other intangibles. As things stand, companies are required to give a value to acquired IP, but there is no rule saying the same has to be done for self-generated assets. When the value of so many companies in so many parts of the world is now intimately linked to the IP and the intellectual capital they own that is ridiculous. It means that both company boards and investors get a skewed idea of where a business’s strengths and weakness might lie, and are often searching in the dark when it comes to deciding and judging strategy. That’s bad enough in good times, but when the going is as tough as it is today, it’s a disgrace.
By and large the accountancy profession has looked at IP and declared that as it is so hard to come up with fair valuations it is probably best not to try in the first place. And despite some attempts to change this, and some very well-known voices pointing out the absurdity of the situation, by and large ignoring the problem has been the rule of the day. But I wonder how much longer that position can stand. In the last year we may well have reached an IP tipping point. It has moved to the business mainstream. Patent portfolios are now big news; they are selling for billions of dollars; company stock prices rise and fall on perceptions of how they are being managed; they are driving serious sized acquisitions. For every deal that has been done, you can be sure that five or 10 others have been considered. And you can also be certain that both investors and senior executives are asking more about IP than they have ever done before. As a recent article in CFO magazine makes clear, they have no option.
Because of all of this, it is difficult to see how much longer people are going to accept the notion that finding some kind of standardised form of balance sheet valuation for all types of IP is just too tricky to attempt. Given everything that can be done these days, if I were an investor in a high-tech or life sciences company, or someone sitting in the CFO’s or CEO’s office at one, I am not sure I would be too keen on meekly going along with the do-nothing formula. Instead, I would be saying that I have to know about IP value and, what’s more, I have a right to know because it is the only way I can do my job properly. Of course, IP value is all about context, but so is everything else. There are always solutions if you look hard enough for them. The current situation is not sustainable.
IA management, Patents, IP business, IP valuation
There is ISO Standard 10668 for Brand valuation and also a German industry norm DIN 77100(maybe still in draft version?) on patent valuation. These documents could be used for valuation giving an objectified value depending on the valuation context and the valuation model used. The driving force behind the German norm was Prof. Alexander Wurzer in Munich.Eberhard Nuding, Nestlé PTC Orbe on 23 May 2012 @ 16:26