Brand and Intangible Asset Valuation

Brands have gradually been moving up the corporate agenda and today play a major role in the life of most successful companies. The financial role of brands has increasingly been recognized and accounting standards and tax legislation has been introduced that begin to recognize their growing importance and reflect the value that brand and other intangibles add to the bottom line.

Tax and Accounting regulatory bodies have also started demanding numbers to be allocated to the identified intangible assets acquired as a part of Business Combination.

ValServe conducts valuations and analytical assignment for branded enterprise and branded businesses. We have the expertise to assist clients in ascertaining and assigning accurate value to their intangibles and brands using internationally accepted approaches.

There may be a need for valuation of Intangible Assets of your business for different purposes like

  • Financial Reporting
  • Merger & Acquisition
  • Joint Venture Purpose
  • Licensing and Franchising
  • Financing from Banks or Financial Institutions
  • Internal Management Review Purposes

Impairment Studies for Goodwill and other Intangibles

Financial Reporting Standards require that companies that have recorded goodwill and other intangible assets on their balance sheet must test these assets annually or as and when indicators suggest that whether there is an impairment / diminution in the value of the asset.

US GAAP – ASC 350 (Previously SFAS 142)

ASC 350 requires that goodwill impairment analysis be conducted at the reporting unit level every year. It requires a detailed determination of the fair value of a reporting unit performed annually, provided there is no indication of adverse change in the value and it falls below the carrying value for a reporting unit. However, due to change in the circumstances, if the fair value of a reporting unit falls below its carrying amount, the Goodwill shall be required to be tested for impairment between the annual tests.

IFRS & Indian GAAP – IAS 36 and AS 28

Impairment of Assets requires the testing of goodwill and long-lived intangible assets on an annual basis with other assets tested where there is an indication that the asset may be impaired.

It requires that Goodwill Impairment analysis be conducted at a Cash Generating Unit Level (CGU Level). Goodwill impairment test under IFRS frequently give material different results to those under US GAAP due to the three steps test used under US GAAP.

Volatile financial markets and shifting economic conditions can impact the value of a company’s assets across the balance sheet. As a result, companies are often challenged in making the best decisions for measuring and reporting impairment charges. Improper decisions can adversely impact earnings or prompt unwanted scrutiny from regulators.

ValServe has the requisite skills and proven track record in performing unbiased and fair impairment analysis that brings clarity to the management, auditors, and regulators regarding the impairment status of the assets

Valuation of Equity Stock Option Plan (ESOPs)

The concept of employee stock options (ESOPs) has seen various phases in its lifespan. The Technology and IT industries, both in India and abroad, have seen great benefits and acceptability of ESOPs from their inception till the 1990s but afterwards, falling stock prices and changes in accounting requirements reduced the attractiveness of such schemes. Nevertheless, recession always forces innovation and entrepreneurship, and with the rise of new growth sectors such as clean energy, education, life sciences etc, the concept of ESOPs has gained momentum once again.

The ESOP schemes, related regulations and the valuation methodologies for their measurement have evolved over the period and have become an important aspect of the decision making process.

IFRS and US GAAP require entities to determine the Fair Value of ESOPs and to expense this through the income statement over the vesting period. ICAI has also recently issued an exposure draft of AS 33 on accounting treatment of share based payments (corresponding to IFRS 2).

Valuation of employee stock options is complex and should be carried out with the right tools and inputs to capture the correct impact on financials. For private companies, where one of the key input i.e. equity price is not known and has to be estimated, careful estimation is required.

ValServe’s Valuation models are tailored to our clients’ needs. We assist the client in estimating each and every important parameter that needs to be factored in ESOPs Valuation and that serve the basic purpose of the client.

Valuation of Financial Instruments and Derivatives

Nowadays, innovative and sophisticated financial instruments as well as structured products are introduced by many Corporates and Financial Institutions at an astonishing rate. These derivative contracts are with complex features and customized financial models are necessary to assess their fair values.

We can assist our client in valuing following various kinds of Financial Instruments and Derivatives:

  • Bond Valuation
  • Call Options and Put Options embedded as a part of Business Transfer Agreement
  • Warrants and Rights attached with any derivative instrument
  • Thinly traded stocks of public listed entities

Valuation for Tax and Corporate Laws Matter

The Regulatory Bodies like CBDT and Ministry of Corporate Affairs have been focusing on stringent norms and regulation as far as tax and legal matters are concerned. Tax Planning and Strategies have become more complex and highly scrutinized by regulatory bodies worldwide. Tax and Company Law Board authorities have emphasized much on the Valuation in both the scenario of pre as well as post implementation of the strategy.

ValServe’s thorough understanding of the Tax and Corporate Laws have enhanced our competence with respect to Tax and Regulatory Valuation Consulting.

Our Valuation Services for Tax and Corporate Laws includes:

  • Purchase Price Allocation for Slump Sale Transaction for Income Tax Purpose
  • Valuation for Capital Gains Tax, Estate and Gift Tax Purposes
  • Valuation for Transfer Pricing related issues in Cross Border Transaction
  • Restructuring from Tax Perspective
  • Merger and Amalgamation Scheme under Companies Act (Section 391-394 Schemes)

Purchase Price Allocation for Financial Reporting

Purchase Price Allocation is an activity needs to be carried out, post M&A Transaction, for Financial Reporting Purposes under US GAAP, IFRS and Indian GAAP. As per IFRS 3 and ASC 805, Acquisition Price has to be allocated amongst identified Tangible and Intangible Assets based on their Fair Values.

One of the core issues in Purchase Price Allocation is identification and Valuation of those intangible which are not lying at present on the face of the Company’s Balance Sheet. The process starts with identification of Acquirer and Acquiree Company and Date of Acquisition. Business Plan has to be analyzed carefully in order to identify the synergies of the transaction which in turn helps in identifying and measuring the Value of Core Intangibles of the Business.

Our Business Combinations Services Include

  • Allocation of the Purchase Price to Cash Generating Units
  • Fair Value Estimation of Intangible Assets including Brand / trade name, Customer Relationships, Technology Know-how, Patents etc.
  • Fair Value of Real Estate and Property Plant and Equipment
  • Fair Value of other assets, liabilities and contingent liabilities, if any
  • Measurement of Residual Value i.e. Goodwill

Business & Equity Valuation

The value of any business depends on two things: future profits and the risks associated with such profits. ValServe’s deep expertise in financial modeling and forecasting gives you assurance that the information underlying our business valuation estimates is as accurate and reliable as possible. Moreover, our experience in business valuation gives you assurance that appropriate methods are used to reach accurate, reliable estimates of the market value of your business. Our business valuation estimates represent what business owners could reasonably expect the market prices of their businesses to be in a transaction.

Some of our business valuation services include

Startup Valuations: We provide business valuations to assist entrepreneurs negotiate the equity ownership position to sell, and the price of the equity, when raising startup capital.

Merger/Acquisition Valuations: We provide business valuations to assist entrepreneurs’ structure and negotiate merger and acquisition transactions, including determining optimal debt and equity structures.

Financial Reporting related Valuations: We provide business valuations, and valuations of underlying assets and liabilities, to assist accountants properly apply the provisions of accounting standards.

Our strength in valuation consulting stems from our wide backgrounds in financial modeling and forecasting, equity analysis and research, M&A transaction negotiation and structuring, and financial accounting and reporting.