Valuation for Financial Reporting : Fair Value Measurements and ...

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Implementation Aids 189CompletedN/AHistory of the Asset (Continued)q q 13. Provide isolated financial results directly related to the asset, such as:a. Historical cost to create the assetb. Annual cost to maintain the assetc. Specific cash flow related to the assetq q 14. Provide a description of the history of the asset, including year(s) created.q q 15. Provide all contracts or agreements.q q 16. Provide all strategic, marketing and business plans related to the asset.Industry and Marketq q 17. Provide all market or industry surveys or studies related to the asset.q q 18. Describe the competitive environment related to the asset.q q 19. Describe the general economic environment related to the asset.Financial Informationq q 20. Describe the specific industry environment related to the asset.q q 21. Provide all previous valuation reports related to the asset.q q 22. Provide all financial projections including unit sales.q q 23. Provide all budgets/forecasts.q q 24. Determine associated cost of capital related directly to the asset.Life Cycleq q 25. At what stage in its life cycle is the asset?q q 26. Please describe the product life cycle.Valuation Approachesq q 27. Determine valuation approach:a. Cost Approach - The cost approach is based on the principle ofsubstitution. A prudent investor would not pay more for an intangible assetthan it would cost to replace that intangible asset with a ready-madecomparable substitute. Some intangible assets likely to be valued using the(continued)
190 Valuation for Financial ReportingCompletedN/AValuation Approaches (Continued)cost approach include computer software, automated databases,technical drawings and documentation, blueprints and engineeringdrawings, laboratory notebooks, technical libraries, chemicalformulations, food and other product recipes, and so on.b. Market Approach - The market approach compares the subjectintangible asset with similar or comparable intangible assets that havebeen sold or listed for sale in the appropriate primary or secondarymarket. Correlationsmust be extrapolated.c. Income Approach - The income approach measures future economicbenefits, discounted to a present value. Different measures of economicincome may be relevant to the various income approach methodologies.Given the different measures of economic income that may be used inthe income approach, an essential element in the application of thisvaluation approach is to ensure that the discount rate or thecapitalization rate used is derived on a basis consistent with themeasure of economic income used.Cost Approachq q 28. Determine the appropriate cost methoda. Reproduction cost (The cost at current prices to construct an exactduplicate or replica of the subject intangible asset. This duplicatewould be created using the same materials, standards, design, layoutand quality of workmanship used to create the original intangible asset.)b. Replacement cost (The cost to create at current prices an asset havingequal utility to the intangible asset. Replacement cost utilizes modernmethods and standards, state of the art design and layout andthe highest available quality of workmanship.)q q 29. Determine the appropriate adjustment for obsolescence.a. Physical deterioration (The reduction from cost due to physical wearand tear resulting from continued use.)b. Functional obsolescence (The reduction due to the inability to performthe function or yield the periodic utility for which the asset wasoriginally designed.)c. Technological obsolescence (The reduction due to improvements intechnology that make an asset less than an ideal replacement for itself,generally resulting in improvements in design or engineering technologyand resulting in greater standardized measure of utility production.)d. Economic obsolescence (The reduction due to the effects, events orconditions that are not controlled by, and thus external to, the currentuse or condition of the subject asset.)(continued)
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VALUATION FORFINANCIALREPORTINGFair
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VALUATION FORFINANCIALREPORTINGFair
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To our familiesnear and faryoung an
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PrefaceThe second edition of this b
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AcknowledgmentsTo Deanna Muraki, th
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xivAbout the Authorsappraiser with
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Valuation for FinancialReportingFai
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2 Valuation for Financial Reporting
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10 Valuation for Financial Reportin
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Appendix 1.2Pronouncements Excluded
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Intellectual PropertyAppendix 2.1On
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Appendix 2.2Significant Changes in
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# Copyright 2007 by FVG Holdings, L
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Exhibit 3.4 Target Company Business
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Exhibit 3.5 Target Company Business
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Exhibit 3.7 Target Company Valuatio
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Exhibit 3.7 (Continued)No. Job Titl
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Exhibit 3.8 Target Company Valuatio
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Exhibit 3.10 Target Company Calcula
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100 Valuation for Financial Reporti
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Exhibit 3.16 (Continued)Total Fair
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Exhibit 3.17 (Continued)2017 Taxabl
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Exhibit 3.19 Target Company Valuati
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Exhibit 3.19 (Continued)No. Job Tit
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Exhibit 3.22 Target Company Calcula
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Exhibit 3.23 (Continued)(5) After-t
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Exhibit 3.24 (Continued)Sum of Retu
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Exhibit 3.27 Target Company Summary
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Page 231 and 232: 210 IndexBusiness Enterprise Analys
Page 233 and 234: 212 IndexGoodwill (continued )111,
Page 235 and 236: 214 IndexLong-termcapital, 71debt,
Page 237 and 238: 216 IndexSecurities and Exchange Co
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