IP Valuation & Taxation

Joyce Lui

Sujit Khale

Client – Novatel Wireless Inc

Leader in Wireless Broadband industry providing hardware and Software solution

Market cap – 88M Employees – 301 Headquarter in San Diego, CA Major market – North America, Europe IP valuated

Software Patents

Company Statistics

Valuation Methods

Cost approach Market approach Income approach

Cost Approach

The cost approach seeks to measure the future benefits of ownership by quantifying the amount of money that would be required to replace the future service capability of the subject intellectual property.

Since intellectual property is generally not sold in the market like tangible assets, we do not have market prices as a starting point in the application of the cost approach.

Market Approach

The market approach is based on the premise that market transactions of intellectual property indicate value.

Market information can be very useful in analyzing and valuing intellectual property, but it seldom is comprehensive enough to provide the basis for a satisfactory conclusion of value on its own.

Income Approach

The income approach is based on discounted cash flow theory and defines the value of the subject property as the present value of the anticipated net economic benefits to be achieved over the duration of the property’s useful life.

The net income of property over its lifetime is used as the approach.

Client Study

Provides IP content through packaged solution

Valuation All software and IP is valued based on Income

approach method. Difficult to separate IP from products or other IPs

.

Taxation - SFAS 141

Requires purchase price is allocated for all tangible and intangible assets

All intangible assets associated are separated from goodwill.

Taxation - SFAS 142

Further categorization Assets needs to be recognized at unit level Intangibles needs to be recognized as finite-

lived or indefinite-lived Finite assets needs to be amortized Indefinite lived assets are subject to annual

impairment test

Balance Sheet

References

Chaplisky, S. (2003, May). Methods of Intellectual Property Valuation. 1-12. Charlottesville, Virginia: Darden University of Virginia.

Mard, M. H. (2000). Intellectual Property Valuation. Los Angeles.

Singla, A. (n.d.). Valuation of Intellectual Property.