ELZABURU has had the pleasure of working together with the publisher Thomson-Reuters Aranzadi on Fashion Law, a pioneering work in Spain on the subject of fashion law, which was presented on 16 April.

In these short weekly summaries, the professionals at ELZABURU who participated in the work offer us a brief outline of their contributions:

Valuation of intangible assets

As time goes on, intellectual assets are accounting for an ever greater share of the value of fashion companies, and the most valuable companies worldwide are those holding trade marks, patents, or designs valued in the many millions.

Valuation of intangible assets in the fashion sector poses a challenge because of the incorporeal nature of these assets, since they consist of a number of features that are hard to evaluate using traditional methods of appraising property, better suited to tangible assets.

Knowing how to value a company’s intangible assets is as important as knowing how to value a company’s tangible assets, since the former may contribute very significantly to a company’s value.

Valuations of this kind may be needed for many different reasons: accounting of a company’s intangible assets for legal and tax purposes, contributing assets to a company, licensing the assets, compensation in contentious proceedings, use of assets as a security interest, and other operations.

Valuation of intangible assets can also be relevant in the context of corporate due diligence or audits. Valuation approaches ordinarily involve the following steps: identifying the intangible assets to be appraised, ascertaining what rights are held in them, verifying their status and checking to see whether they are subject to any third-party rights, and, finally, performing the actual valuation of the intangible assets themselves.

Professionals practicing in different fields should take part in the valuation with a view to producing an estimate as close as possible to the true value in light of existing circumstances.

There are two main approaches, both of which need to be taken into account when appraising intangible assets: the quantitative approach (numerical and economic data) and the qualitative approach (quality and external factors).

The reason for performing the valuation must be clearly established before valuation is undertaken in order to be able to select the approach or approaches to be used. Basically, the main approaches are:

  • Cost approach: the cost needed to create or replace the asset.
  • Income approach: the present value of the profits anticipated over the lifetime of the right.
  • Market approach: the price other buyers have paid for similar rights in the marketplace.

Where different types of intangible assets are to be appraised, these approaches may be differently suited to each type, and sometimes one or another may be more advisable depending on the circumstances in each case.

Author: Cristina Espín

Visit our website: http://www.elzaburu.es/en

 

Blog entries in the series Fashion Law:

1.Trademark protection in the fashion sector (23.04.2018)

2.Design protection in the fashion sector (30.04.2018)

3.Patent protection in the fashion sector (07.05.2018)

4.Protection of fashion through copyright (21.05.2018)

5. Image rights in the fashion sector (28.05.2018)

6.Fashion Law. Data Fashion (04.06.2018)

7.Counterfeiting in the fashion sector (11.06.2018)

8.Exhaustion of rights in the fashion sector (18.06.2018)

9.Corporate reputation in the fashion sector (25.06.2018)

10. Protection of the commercial imagen of a fashion brand (04.07.2018)

11. Websites, Apps & Social Networks (13.07.2018)

12. Valuation of intangible assets (17.07.2018)

13. Licensing (06.09.2018)