Represents an estimate of cash flows from potential revenues, expenses, profitability and capital expenditures associated with the use of intangible assets (as the present or capitalized value of future net cash flows, revenues or saved costs over the economic life of such intangible assets).
It uses an estimate of the costs incurred or necessary to re-create or restore the appraised values.
Market method (comparative)
It follows on the basis of comparable market transactions for intangible assets. In view of the frequent lack of market information on the sale of an NVP (separately from the sale of a business), a comparison to the components of an NVP taken for purchase price allocation (PPA) in the investor’s books after a company acquisition transaction is most often applied.
It is worth mentioning that according to accounting regulations, goodwill is the difference between the purchase price of a certain entity or organized part thereof and the lower fair value of the net assets acquired. If the purchase price of an entity or organized part thereof is less than the fair value of the net assets acquired, the difference is negative goodwill.
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