Intangibles are very often not valued, either private or public companies. Intangibles can comprise 70% of a company’s worth (The Telegraph, Feb 2017). Their balance sheets will indicate a number (and most often not), yet this is not the true value of their intangible assets, such as intellectual property (IP) or know-how.
This is due to strict accounting rules regarding what can be indicated, in order to protect investors and companies (often from themselves). In itself, this is not a negative, yet it does create a limitation in seeing and actually knowing the true value of intangible assets.
As an example of this, Coca-Cola does not have a value assigned to their brand (a form of IP) on their balance sheet (since it was not acquired, but developed internally), yet the true value of the brand is estimated at $80.31 billion worldwide (in 2016, from Statista). This valuation was done from a 3rd party perspective (not from within) and it changes every year.
Intangibles, such as IP, always have value, which does change over time; just because it is not reflected on a balance sheet or financials does not mean the value is not there. And just because it is not necessarily seen or fully reported does not mean it does not have an impact on a company’s strategy and its true worth.
What is the risk or the price of not knowing it, for you and your company?
– Cliff Pavlovic, PhD
Kalotem can help you with IP valuations, to know the value of your intangible assets.