Valuation of Proprietary Technology

This publication provides insights on valuation of proprietary technology.

Technology-based intangible assets protect or support technology and may include, patented technology, in- process research and development, unpatented technology, computer software etc. In general parlance, the terms are used interchangeably. However, in dealing with the valuation of technologybased intangible assets, understanding the exact nature of the subject intangible is of utmost importance.

Proprietary technology is more of a basket of intellectual property. There is no one-size-fits-all as far as proprietary technology is concerned. It may include processes, tools, systems, trade secrets, and formulations that are the property of the business and provides some sort of benefit to the owner. A proprietary technology is the overall technology that is used by the organization. It may be either developed by, or purchased by the business owner. A proprietary technology may be patented or unpatented.

Valuation of technology-based intangibles is required for financial reporting purposes such as in compliance with SFRS (I) 3: Business Combinations, as the intangibles acquired as a part of a business combination are required to be measured at fair value. Based on SFRS(I) 1-36: Impairment of Assets , the value of the intangibles has to be tested for impairment which requires a measurement of the underlying technology. Companies may also require valuation of technology, as part of the due diligence process, as one may want to know the value of underlying technology if it is the primary reason for the acquisition. Valuation may also be sought in relation to tax reporting, legal and insolvency proceedings or monetisation of technology developed by a company.

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Contributing Advisors

Jason Pang

Associate Partner,
KNAV