CIRD10240 - Intangible assets: introduction: valuation issues
Where the value of assets needs to be considered
Within the regime there are times when the valuation of chargeable intangible assets, or the amount charged for the use of chargeable intangible assets, needs to be considered, for example:
- Attribution of fair values to assets on acquisition in accordance with GAAP, (see CIRD30520).
- Impairment reviews in accordance with GAAP, (see CIRD30515).
- When market value is imposed on transfers between related parties, (see CIRD45030).
- When an asset ceases to be a chargeable intangible asset, (see CIRD47030).
- Where apportionments are required, (for example see CIRD11175, CIRD11685, CIRD12740, CIRD13080, CIRD13245, and CIRD25015).
- Where there are transfer-pricing considerations, (see CIRD47060).
- When a degrouping adjustment arises, (see CIRD40500 onwards).
For questions of accountancy the first recourse for inspectors
to their local Revenue Accountants, while for questions of
international transfer pricing the first recourse is to Revenue
Policy International. But the Intellectual Property Team at Shares
Valuation is available to provide advice, support and service
during both the initial risk assessment process and the working of
any related enquiries.
The complicated nature of intangible asset transactions means
that a variety of specialisms may be called upon in the working of
any issues arising and that areas of overlap are going to occur. In
order to underpin a co-ordinated approach that achieves robust risk
assessment and consistency of approach, there will often be the
need for issues to be considered between Shares Valuation, Business
Tax and Revenue Policy International working together.
Revenue staff and Local Revenue Accountants will find
telephone contact numbers for the Intellectual Property Team on the
Shares Valuation intranet site. They will be happy to discuss any
issues, including valuation models, prior to a referral. They will
also provide informal valuations at the risk assessment stage or
during the working of a case. However a good valuation depends on
accurate and detailed information.
Examples of useful information are:
- a full description of the product line or business, together where relevant with details of the filing of Patents and Trademarks, and an assessment as to the contribution those and other intangibles make to the overall success of the enterprise;
- the accounts for the last three years before the date of valuation for the entity that held the asset;
- the management accounts and other financial information that provide the historic and forecast sales/profit figures relevant to the asset, and insight into other issues such as R&D, marketing, and advertising expenditure;
- copies of any internal reports concerning feasibility, funding and expenditure programmes;
- copies of all relevant sale and licensing agreements;
- a reasoned explanation as to the value returned or royalty rate adopted - ideally to follow good valuation practice more than one approach or methodology will have been used in order to benchmark the proposals made;
- copies of any transfer pricing reports.
