Valuation of Intangible Assets as per IFRS

Sai Nithyashri | Last updated: 21 June 2024

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Quick Summary

Valuing intangible assets under IFRS involves assessing their fair value, which is the price an asset would fetch in an arm's length transaction. The process begins with identifying assets that are identifiable, controllable, and likely to generate future economic benefits. IFRS allows for various valuation methods, including market, cost, and income approaches, with the choice depending on the asset's nature and available data.

Valuation of intangible assets under IFRS (International Financial Reporting Standards) involves assessing their fair value, which is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arms length transaction. Intangible assets are non-physical assets that

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FAQ :

Intangible assets are non-physical assets that have identifiable economic value and are expected to generate future economic benefits for an entity, such as intellectual property or brand recognition.

An intangible asset must be identifiable, the entity must have control over it (or the right to control it), and it must be probable that future economic benefits will flow to the entity.

IFRS permits the use of various methods, including the Market Approach (comparing to similar transactions), the Cost Approach (estimating replacement cost), and the Income Approach (discounting future cash flows).

Key inputs and assumptions include projected cash flows, discount rates, growth rates, royalty rates, and market data. These should be based on reasonable and supportable information.

Entities must disclose the valuation methodologies used, key assumptions and inputs, sensitivity analysis, and any significant changes in valuation techniques or estimates.

Intangible assets with indefinite useful lives are not amortised but must be tested for impairment at least annually, or more often if indicators of impairment exist.