How to achieve the reliable intellectual property valuation results

IP valuation is the process of establishing the arm's length or fair market value of IP assets. Intellectual property valuation assists in evaluating not just the IP's worth but also the company's overall value. Because intellectual property is typically one of a company's most valuable assets, determining an appropriate valuation hinges on properly valuing its intellectual property.

In recent years, the worldwide tax environment has changed dramatically, with new regulatory rules and increased scrutiny of intercompany transactions forcing many multinational corporations to reconsider their IP ownership structures. As a result, according to the Organization for Economic Co-operation and Development (OECD), misallocation of profits generated by intangibles has played a significant role in base erosion and profit shifting (BEPS), as many multinationals have transferred their intellectual property (IP) to low-tax jurisdictions to reduce taxes and maximize profits.

How to Get Accurate Intellectual Property Valuation Results?

IP valuation is not just the most complicated and contentious element of intellectual property valuation businesses' work, but it's also the sector with the most substantial planning and optimization potential. Here are some suggestions for managing and valuing IP assets:

Be practical and logical:

If the financial rewards associated with a specific intellectual property appear too good to be true, they most likely are. It's probably not the most trustworthy intellectual property value methodology to apply if both the buyer and the seller find the results too appealing to one side or the other.

Evaluate the possible results:

Conducting testing to assist assess the outcomes for both the buyer and the seller is one of the best practices to follow. You may be sure that the techniques used are reliable if it appears that both the buyer and the seller would consider the IP transaction to be economically fair.

Expect dispute to valuations:

IP valuation is contentious, and tax authorities frequently disagree. As a result, taxpayers should approach IP valuation with caution. Companies should pick the intellectual property valuation technique that is the most defensible in the case of a dispute, not necessarily the one that produces the most appealing financial results, as previously stated.

Seek professional advice:

Few firms have an in-house IP valuation specialist, and expert assistance is required to avoid future conflicts. Working with a trained professional lowers your risks of being subjected to an audit adjustment or, worse, fines. If an IP valuation is wrong by a considerable amount, the IRS and several foreign government agencies can impose fines. However, the regulations governing applying penalties typically provide that if the appraiser's intellectual property valuation report indicates a reasonable faith effort to comply with the criteria, fines may not be applied, even if an adjustment is made. Thus, a taxpayer's best first line of defense may be to hire a certified expert to verify compliance with the applicable valuation requirements.

Need professional advice on intellectual property valuation?

Accurate IP valuations are more complex than ever before, but they are also more critical. Your firm may be sure that it is employing the most appropriate intellectual property valuation procedures with the aid of a seasoned consultant, significantly lowering the risk of disputes or penalties.

Spring Galaxy experts give professional value opinions for all business assets, including intellectual property, for the world's biggest businesses, and we can do the same for your company. So let's speak about your specific IP issues and how we can collaborate to improve your company's worldwide operations.