Identification of valuation's subject

Identification of the subject of valuation is essential in the case of intangible assets.

The identification process is the first step towards establishing the information conditions of the valuation, the value standard and available valuation methods. As a result of this process, we obtain a detailed description of intangible goods, specifying such features as:

• Transferability (e.g. a certificate that cannot be transferred through a purchase-sale transaction can only be "transferred" as an asset of a business entity, and only in this case will it have intrinsic value. Similarly, it is not always possible to transfer know-how, e.g., when the owner of the know-how does not have specific solutions enabling the transfer of knowledge to other people),
• uniqueness (e.g., there are no comparable intangible assets or fields of exploitation - in the light of the applicable principles of comparative analysis - which limits the use of comparative analysis in the valuation process and, consequently, the reliability of valuation methods based on the market approach),
• Useful life (e.g. a period limited in the case of a patent by the date of expiry of protection and the pace of technical progress and unlimited in the case of valuable brand names),
• Flexibility (e.g. the license agreement may include the possibility of reacting to changing reality by exploiting real options, i.e. rights that can be exercised by modifying the method, scope, fees and other vital parameters of the use of intangible goods),
• Complexity (e.g. complexity, difficulty in separating the stream of future benefits generated by specific components of the intangible assets portfolio, especially when the components of this portfolio generate numerous synergistic effects),
• Fields of exploitation (e.g. existing or potential market niches, restrictions on use - territorial, subjective, quantitative, etc.),
  legal situation (e.g. existing or potential claims from third parties, method and scope of legal and organizational protection - significant in the case of technical and managerial solutions of a know-how nature).

Errors in identifying intangible assets result in incorrect selection of methods and the complete uselessness of the valuation result.