BVWire Australia Issue #10-1 | 4 May 2015


Indefinite is not infinite in trademark valuations

Valuation experts Christof Binder (Capstone Branding GmbH) and Robert Morrison (Morrison Valuation & Forensic Services LLC) say the valuation of an intangible asset based on its useful life is problematic when venturing into the realm of trademarks.

In the Q2 Business Valuation Australia (subscription required), they explain it this way: “For trademarks, appraisers regularly opt for an indefinite life when no obvious factors exist that would limit the future economic life of the trademark. Almost all brands are, however, finite, and assuming indefiniteness can have two serious effects: one on value and one on accounting.” Binder and Morrison go on in the article to suggest some guidelines and tools for analysing the life cycle of a brand and estimating its remaining useful life (RUL).

Binder and Morrison point out that the term “indefinite” does not mean infinite. “If an intangible asset is determined to have an indefinite useful life, it shall not be amortised until its useful life is determined to be no longer indefinite. Instead, the asset shall be tested for impairment at least once in each reporting period,” they say.

To avoid misunderstandings, Binder and Morrison say they do not mean appraisers and accountants should avoid indefinite lives in valuations. “For example, for goodwill, this would be simply impossible. We would however like to increase the awareness of the problems inherent in infiniteness and when and how to estimate a finite RUL of trademarks.”

The article, “Indefinite Is Not Infinite—Solving a Dichotomy in Trademark Valuation,” discusses the serious effects that the assumptions of indefiniteness can have on valuation and accounting. Subscribe to Business Valuation Australia to learn more about the guidelines and tools used to analyse the life cycle of a trademark.

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Trademark valuation data for CRM software

The average trademark royalty rate for CRM software is 2% of revenue, according to a new analysis from Markables. This information is gleaned from the Markables database of over 5,000 trademark valuations published in financial reporting documents of listed companies from all over the world. The database reports value solely for the use of trademarks (not bundled with other rights).

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BV expert questions the small-cap premium

“I have never used a small cap premium when valuing a company and I don’t plan to start now,” states Professor Aswath Damodaran (New York University Stern School of Business) in a recent blog post.

He re-examines relevant data and discusses the longstanding arguments for adding a size premium to the discount rate for small firms.

Triple whammy: Damodaran cites three reasons he doesn’t use a size premium: (1) the historical data are yielding more ambiguous results, which calls into question whether a size premium exists; (2) forward-looking risk premiums are yielding no premiums for small-cap stocks; and (3) if based on intuition (that smaller firms are riskier than larger firms), much of the extra risk can either be diversified away, better treated as an adjustment to expected cash flows, or it’s double counted. He also makes the point that “inertia” is another culprit. Some analysts add a size premium by rote because that’s the way it’s always been done.

What do you think? Email us your comments.

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Global BV body appoints high-profile trustees

The International Valuation Standards Council (IVSC), the global standard setter for valuation practice and the valuation profession, has made two high-profile appointments to its board of trustees. Ethiopis Tafara, a vice president for corporate risk and sustainability and general counsel of the International Finance Group (IFC), and Zhang Guochun, secretary-general of the China Appraisal Society (CAS), join as trustees.

“We are extremely pleased to be welcoming two new trustees to the IVSC who bring with them enormous specialist knowledge as well as experience of operating on an international level,” says Sir David Tweedie, IVSC chairman. “We are a global body which covers both established and emerging markets and our new trustees will provide critical insight and connections into these areas.”

Extra: BVR’s new Global Business Valuation Resource Centre is designed to deliver best-in-class news, training, research, and data tools to business valuation professionals around the world. If you have ideas on topics, products, and/or news items, we would welcome the chance to speak with you! Contact Lexie Gross at

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What data do you wish you had?

Business Valuation Resources is looking for input on the data sources you need most for your valuations. Take our five-minute survey now to give us feedback on your data needs. We will enter you in the drawing for a $250 (USD) BVR gift certificate. Take the survey now through 6 May.

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Global BV conference in Atlanta (U.S.) 7-8 May

Heading to Atlanta, along with BV professionals from around the world, for IACVA’s 2015 International Valuation Forum 7-8 May are: Chris Mellen (Delphi Valuation Advisors Inc.), who will speak on brand valuations; Jim Harrington (Duff & Phelps), on new data being rolled out; Bill Hanlin (Hanlin Moss Group, PS), on peer review and business valuations; Dr. Clifford Lipscomb (Greenfield Advisors), on mining issues; Mark Zyla (Acuitas Inc.), on fair value for financial reporting issues (IFRS); Curtis Kimball (Willamette Management), on valuations for international tax issues; and others. Business Valuation Resources will be there—we hope to see you!

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We welcome your feedback and comments. Contact the editor, Sonia Nair, at
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In this issue:

Trademark valuations

Trademark valuation data

Damodaran questions small-cap premium

IVSC appoints trustees

Data survey

Global BV conference





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