METHOD INTANGIBLE ASSETS PRICE APPRAISAL

Legal basis

Circular No. 37/2024/TT-BTC

1. Concept of intangible assets

According to the provisions of Circular 37/2024/TT-BTC regulating standards for valuation of intangible assets, it explains that intangible assets are assets that have no physical form but have the ability to create rights and benefits. economic benefits, which manifest themselves through economic characteristics. Intangible assets do not include cash.

Intangible assets are assets that have no physical form but have the ability to create economic benefits. To be recognized as an intangible asset, it must satisfy the following criteria: condition or:

• There is tangible evidence of the existence of intangible assets;
• Ability to generate income from intangible assets;
• The value of intangible assets can be quantified in terms of money.

2. Classification of intangible assets

According to regulations, intangible assets include the following types:

• Intellectual property and intellectual property rights according to the provisions of law on intellectual property.
• The rights to bring economic benefits to the parties are specifically stipulated in civil contracts according to the provisions of law, such as commercial rights and mineral exploitation rights.
• Non-contractual relationships bring economic benefits to the parties, relationships with customers, suppliers or other entities, such as customer lists, databases.
• Other intangible assets: Intangible assets that satisfy the prescribed conditions of existence, value and ability to generate income for the owner according to the content mentioned in section 1.

3. Method of valuing intangible assets

For intangible asset valuation, there are 3 basic approaches: 

1. Market approach: the appraisal method is a comparative method.
2. Cost approach: includes replacement cost method and regeneration cost method. 
3. Income approach: includes cash method using intangible assets; excess profit method and incremental income method.

3.1. Market-based valuation method

Market-based valuation is a method of determining the value of an asset by comparing it with similar assets that have been traded on the market during the same time period and under similar conditions. ownership interests in intangible assets and securities that were sold on the open market. This is one of the popular methods in the field of valuation, because it most closely reflects the market value of the asset.

The most commonly used data sources are markets in which ownership interests in intangible assets have been conducted. Accordingly, the appraiser must use at least 03 similar intangible assets for comparison at or near the time of valuation but not more than 24 months from the time of valuation. In case only information about 02 similar intangible assets that have been traded on the market can be collected, the valuation results from the market-based method can only be used to check and compare with the appraisal results. price is obtained from another approach. 

3.2. Cost-based valuation method

Cost-based intangible asset valuation is an approach to determining the value of intangible assets by calculating the costs incurred to create, develop, or replace the asset. , after adjusting for factors such as depreciation or amortization of the asset. In other words, this method will be based on the cost of recreating an intangible asset identical to the prototype of the intangible asset being valued or the replacement cost of creating a similar intangible asset with the same function. functions and uses at current market prices. This method includes two main methods: the regeneration cost method and the replacement cost method.

3.3. The valuation method belongs to the income approach

The income approach determines the value of intangible assets by calculating the present value of the earnings, cash flows, and cost savings that the intangible assets provide. This method often applies to intangible assets that have the ability to generate direct economic benefits, such as trademarks, copyrights, patents, or proprietary software. 

 The income approach includes the following methods: Cash method using intangible assets, Excess profit method and Incremental income method.

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