IRC 409A Common Stock Valuation
This free, guided checker walks your team through the key decision points for IRC 409A Common Stock Valuation. Answer a few questions to see the likely approach and the evidence to document.
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Valuing Identifiable Intangible Assets
This free, guided checker walks your team through the key decision points for Valuing Identifiable Intangible Assets. Answer a few questions to see the likely approach and the evidence to document.
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This tool is a high-level valuation screening aid for general information only and is not a valuation, appraisal, accounting, tax or legal opinion. A defensible conclusion of value requires a qualified valuation specialist applying professional standards to entity-specific evidence.
The questions this tool walks you through
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
Does the asset meet the identifiability criterion - is it separable (capable of being sold or licensed on its own) or does it arise from contractual or legal rights?
The recognition threshold is a gate before any method is chosen: an intangible qualifies only if it can be sold, licensed, or transferred on its own, or if it arises from a contract or legal right even when not separable. Test each candidate against this criterion, because an asset that fails it - such as a general going-concern element - is measured within goodwill, not on its own.
The asset fails the separability and contractual-legal criteria of ASC 805-20-25, so its value is subsumed in goodwill rather than measured as a separate intangible.
Official guidance: FASB Accounting Standards Codification
Which category best describes how this identifiable intangible generates its economic benefit?
The method follows the economics: assets a buyer would license map to relief-from-royalty, the primary earnings-generating asset maps to excess earnings, an agreement that protects earnings maps to with-and-without, and an assembled workforce maps to replacement cost. Classify by how the asset actually earns its return, because forcing one method across every intangible produces double counting.
Test whether a relief-from-royalty method is supportable for the brand or technology. Test whether the customer-related asset is the primary earnings asset for a multi-period excess earnings method. Test whether the non-competition agreement has measurable incremental value under a with-and-without method. Measure the assembled workforce on a replacement cost basis and confirm its role.
Official guidance: FASB Accounting Standards Codification
Is there observable market evidence of an arm's-length royalty rate for comparable intellectual property - comparable license agreements or royalty-rate data - and an identifiable revenue stream the asset supports?
Relief-from-royalty rests on a hypothetical royalty a market participant would pay to license the asset, so it needs both a defensible royalty rate drawn from comparable licenses and a revenue base to apply it to. Screen the royalty evidence for comparability in industry, exclusivity, and profit split; without it the rate is unsupported and another method must carry the measurement.
Measure the asset as the after-tax royalty savings a market participant would pay to license it under a relief-from-royalty method (IVS 210 (Intangible Assets)).
Official guidance: FASB Accounting Standards Codification
Is this the primary earnings-generating asset of the acquired business - the asset that drives most of the acquired cash flows - so that residual earnings after charges for the other contributing assets are properly attributable to it?
Multi-period excess earnings is applied to a single primary asset because it captures the residual cash flows left after every other asset is paid its fair return; applying it to two intangibles in the same cash flow stream double counts. Confirm the asset is the dominant earnings driver, and reserve excess earnings for that asset while measuring the others by royalty, cost, or with-and-without methods.
Measure the supporting intangible on a replacement cost basis where reliable income or market evidence cannot be isolated (IVS 210 (Intangible Assets)).
Official guidance: FASB Accounting Standards Codification
Can contributory asset charges be developed for every asset that contributes to the asset's cash flows - working capital, fixed assets, the assembled workforce, and other intangibles - so the excess earnings can be isolated?
Excess earnings are what remains after each contributory asset - working capital, fixed assets, workforce, and other intangibles - is charged a fair return on and of its value; omitting a charge overstates the subject asset. Confirm a charge can be built for every contributing asset, because the method is only reliable when the residual truly belongs to the asset being valued.
Where contributory asset charges cannot be isolated, measure the asset on a replacement cost basis under IVS 210 (Intangible Assets).
Official guidance: FASB Accounting Standards Codification
What best describes the covenantor's ability to compete and the covenant's enforceability if the non-competition agreement did not exist?
A non-competition agreement is worth the earnings it protects, so its value depends on whether the covenantor could and would compete without it and whether the covenant is enforceable. Weigh the probability of competition, the expected damage to cash flows, and the covenant term; a covenant a party could not or would not breach protects little and carries little value.
Measure the agreement as the difference in business value with and without the covenant, adjusted for the probability and impact of competition (IVS 210 (Intangible Assets)). Treat the agreement's incremental value as de minimis and subsumed in goodwill where the covenantor is unlikely or unable to compete (ASC 805-20-25). Recognize no separate value for an unenforceable covenant; its protection is captured in goodwill (ASC 805-20-25).
Official guidance: FASB Accounting Standards Codification
Is the assembled workforce being measured on a replacement cost basis as a contributory asset that supports another intangible's excess earnings, recognizing that it is not recognized as a separate intangible apart from goodwill?
Under ASC 805-20-55-6 an assembled workforce is never recognized as a separate intangible; its measured value matters only as a contributory asset charge in another asset's excess earnings. Measure it as the cost a market participant would incur to recruit, hire, and train an equivalent workforce, and confirm you are using it as a charge rather than booking it as a separate asset.
Measure the assembled workforce at replacement cost and apply it as a contributory asset charge, not as a separately recognized intangible (ASC 805-20-55-6). Where the workforce is not used as a contributory asset charge and is not separately recognizable, its value is subsumed in goodwill (ASC 805-20-55-6).
Official guidance: FASB Accounting Standards Codification
For the buyer's tax basis, what transaction structure and measurement basis apply, which determines whether a tax amortization benefit is added to the income-approach value?
The tax amortization benefit is the present value of the tax savings from amortizing an intangible's stepped-up basis, and a fair value measured on a market-participant basis includes it because a hypothetical buyer could obtain a step-up regardless of the actual deal structure. Confirm whether the framework is market-participant fair value or an entity-specific basis, because that determines whether the benefit is added.
Add the tax amortization benefit from the stepped-up basis amortized under IRC Section 197 to the excess earnings value. Add the tax amortization benefit under the market-participant premise of ASC 820-10-35 even in a stock transaction. Exclude the tax amortization benefit where the measurement is entity-specific and assumes no step-up.
Official guidance: FASB Accounting Standards Codification
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