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Intangible Asset Valuation

Intangible assets are increasingly important in the modern economy and are becoming a larger portion of corporate valuations. Having a clear understanding of their value is critical to the valuation process for many companies in the telecom, media, and satellite sectors. However, these are often the most difficult assets to properly value. The use of common accounting metrics is usually not sufficient.

Experts often have large differences of opinion in the value of intangible assets. Therefore, when appraising intangible assets, it is imperative that appraisers use robust methodologies, carefully apply them, and rigorously document the process to ensure that the resulting valuations withstand scrutiny. Commonly accepted methodologies include the Relief from Royalty Method (RRM), Multi-Period Excess Earnings Method (MPEEM), With and Without Method (WWM), Real Options Pricing, and  Replacement Cost Method Less Obsolescence. There are other derivative methodologies including the Greenfield Method made famous in the Jefferson Pilot Tax case (see: Jefferson-Pilot v. Commissioner, 98 T.C. 435, 454-55 (1992), aff’d 995 F.2d 530 (4th Cir. 1993). The challenge is that all of these methods are sensitive to initial assumptions and appraiser must apply them with great care.

Summit Ridge Group professionals have deep industry expertise, financial backgrounds, and legal training. This allows us to understand all aspects of intangible asset valuations including their application in the business environment as well as their use in the context of both financial and tax reporting. We have deep training in all approaches of intangible asset valuation including the relief from royalty approach, the Greenfield method, the various forms of the excess earnings approach, optimal deprivation method, market comparables, and others. Most importantly, we understand the strengths and limitations of each approach under different circumstances and how they can best be applied - either individually or in combination.

Summit Ridge Group is particularly experienced in valuing wireless spectrum assets such as FCC licenses.