What’re your brand and technology worth? New valuation guidelines being developed for intangible assets

Business valuers can look forward to more guidance on how to value non-physical assets such as brand value, intellectual property and technology in their valuation reports, through a new set of guidelines co-developed by Singapore’s professional business valuation body.

The Institute of Valuers and Appraisers, Singapore (IVAS), said on Wednesday (Aug 28) that it is working with key international valuation professional organisations – the American Society of Appraisers, the Canadian Institute of Chartered Business Valuators and the UK-based Royal Institution of Chartered Surveyors – to develop guidelines on intangible assets.

IVAS intends to seek public feedback on the proposed guidelines in the first half of 2025.

The value of intangible assets held by firms worldwide continues to grow significantly. According to a report by the World Intellectual Property Organization, corporate intangible assets were worth US$61.9 trillion globally in 2023, up 8 per cent in value from 2022.

Speaking at the IVAS-IVSC Business Valuation Conference 2024, IVAS council chair Lie Kok Keong said: “Consistency and comparability are key elements of a credible intangible assets valuation.

“With this in mind, there is a need to provide a set of guidelines that will facilitate consistency and comparability in intangible assets valuation across jurisdictions.”

The new guidelines on intangible assets will be aligned with international valuation standards introduced by the International Valuation Standards Council (IVSC), a non-profit organisation that serves as the global standard setter for the valuation profession.

Second Minister for Finance and National Development Indranee Rajah, who delivered the conference’s keynote address virtually, said the proposed guidelines will provide valuers with structured methodologies for the valuation of intangible assets, thus “enhancing credibility and reliability in valuation reports”.

IVSC board of trustees chair Lim Hwee Hua noted that valuing intangible assets presents unique challenges, as their very nature makes them “more difficult to quantify and safeguard than their tangible counterparts”.

“However, as businesses continue to evolve and scale on the strength of their intangibles, it is vital that our valuation standards and practices keep pace with these developments,” she said. This is also why the IVSC has issued updated international valuation standards, which will come into effect on Jan 31, 2025.

One key update is that the standards will be refreshed to clearly define the role of artificial intelligence (AI) automated valuation models, as more valuers use AI tools to streamline the valuation process.

Indranee said that these standards will underscore the necessity of a professional valuer’s judgment alongside all valuations produced by an AI automated valuation model.

Enhanced professional courses

Together with the Intellectual Property Office of Singapore and the Institute of Singapore Chartered Accountants, IVAS will also be launching an online professional development course on the existing Intangibles Disclosure Framework in the fourth quarter of 2024.

The course aims to guide professional accountants on how to incorporate intangible assets in their financial reporting process.

The Intangibles Disclosure Framework, which was rolled out in September 2023, provides guidelines to companies on how to disclose and communicate their intangible assets to the likes of lenders, board members and investors.

IVAS will also refresh its Chartered Valuer and Appraiser (CVA) programme for aspiring business valuers by incorporating content on environmental, social and governance reporting standards and intangible assets.

Launched in 2016, the CVA programme is Asia’s first certification programme for the practice of business valuation. The refreshed curriculum is set to be launched in phases from the second half of 2025.

Valuers who are trained to take into account climate-related considerations will be well-positioned to seize new opportunities, said Indranee.

“Understanding sustainability could help valuers provide a more accurate valuation of a company, as they consider factors such as energy efficiency and the impact of climate scenarios on business prospects.”

In turn, banks and investors can also more confidently integrate sustainability factors into their lending and investment decisions, she added.

Source: Business Times © SPH Media Limited. Permission required for reproduction.

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