Valuing Intangible Assets

by | Mar 28, 2016 | Tax and Accounting Desk

Companies are placing increasingly high values on intangible assets such as brands and customer data. These are strong points of value for companies that can help them create the right products, but what does it mean for accountants?

An article in the Wall Street Journal, Accounting’s 21st Century Challenge – How to Value Intangible Assets, cited that “companies in the U.S. could have more than $8 trillion in intangible assets”, which is nearly half of the “$17.9 trillion market capitalization of the S&P 500 index.” This means that companies are investing far more in their intangibles than ever before, making it an important topic of interest for accountants and how they consult their clients.

The Financial Accounting Standards Board (FASB) is considering the idea of requiring companies to include intangible assets in their books, but some key questions have come to surface such as how the intangible assets should be valued. Should they be based on the cost of creation or should management have to estimate and assign a value?

Of the instances where intangibles must be valued, it is an extremely tedious process, meaning it could take several years for the FASB to come up with a concrete set of rules.

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