Tax Rate. In addition, the time to recreate or the ramp-up period also determines the required level of investments (i.e., to shorten the ramp-up period more investment would be required). The income approach is most commonly used to measure the fair value of primary intangible assets. The estimate should also consider that shortening the time to recreate it would generally require a higher level of investment. The income approach may be used to measure the NCIs fair value using a discounted cash flow method to measure the value of the acquired entity. Figure FV 7-2 highlights leading practices in calculating terminal value. At the acquisition date, Company As share price is$40 per share. Because this component of return is already deducted from the entitys revenues, the returns charged for these assets would include only the required return on the investment (i.e., the profit element on those assets has not been considered) and not the return of the investment in those assets. (See further discussion of contributory asset charges within this section.) Some business combinations result in the acquiring entity carrying over the acquirees tax basis. Figure FV 7-7 shows the relationship between the relative values at initial recognition of assets the acquirer does not intend to actively use. The implied growth rate inherent in the multiple must be compared to the growth rate reflected in the last year of the projection period. An internal rate of return can be expressed in a variety of financial scenarios. For example, a company may evaluate an investment in a new plant versus expanding an existing plant based on the IRR of each project. and an after-tax rate of return on debt capital. See below Figure 1 for the relationship between risk and return for different types of tangible and intangible assets. The discount rate should reflect the risks commensurate with the intangible assets individual cash flow assumptions. The fair value of the PHEI in a company that remains publicly traded should generally be based on the observable quoted market price without adjustment. Figure FV 7-8 summarizes some key considerations in measuring the fair value of intangible assets. Each purchase price allocation will present different challenges in reconciliation between these three rates. This method reflects the goodwill for the acquiree as a whole, in both the controlling interest and the NCI, which may be more reflective of the economics of the transaction. A long-term growth rate in excess of a projected inflation rate should be viewed with caution and adequately supported and explained in the valuation analysis. Conceptually, the WACC applicable for the acquiree should be the starting point for developing the appropriate discount rate for an intangible asset.

Micah Parker Obituary, Articles R