Mon, Aug 3, 2020

Simon Webber, Judd Schneider and David Ptashne in Tax Notes: Intangible Asset Valuation Considerations

Simon Webber, Managing Director, David Ptashne, Director in Duff & Phelps Transfer Pricing practice, and Judd Schneider, Managing Director and U.S. Tax Valuation practice leader at Duff & Phelps, recently published an article in the July 6, 2020 issue of Tax Notes Federal and Tax Notes International titled, “Intangible Asset Valuation Considerations in Times of Uncertainty”.

The outbreak of the novel coronavirus was declared a Public Health Emergency of International Concern on January 30, 2020 by the World Health Organization and a U.S. National Emergency on March 13, 2020. The pandemic is first and foremost a tragic global health crisis that has led to unprecedented economic and social turmoil around the world. Equity and debt markets have been dislocated with stock prices bouncing wildly on waves of news about the spread of the virus, its casualties, government interventions, flights to quality, and pure speculation. It is unclear how long this disruption will continue.

At the time of this article’s drafting, parts of the nonessential economy are readying to reopen. While actions to protect employees, customers, and other business assets remain paramount, it is critical for companies to consider and respond to a new world and how best to position within it.

Externally, many industries will find that the pandemic has cemented some very different behaviors and constraints in their markets. There are likely to be significant shifts in what services or products are used or bought by businesses and consumers, and how they are purchased or consumed. Internally, businesses are having to rethink or adjust supply chains, customer experiences, and business continuity measures. No matter the industry, business prospects and therefore values have likely changed post-COVID-19. The pandemic will also likely cast a long shadow in terms of perceived general economic risk until vaccines or other longer-term solutions are found. Thus, related intangible asset and goodwill values are likely to have moved materially, perhaps temporarily, but in some cases more permanently. Much will depend on the facts and circumstances of each industry and business.

This article first discusses issues and opportunities involving significant business and intangible value changes. We then explore some implications of changes in intangible value for completed transactions, looking specifically at financial reporting value effects from a tax perspective. We finish with thoughts on some key issues arising in the valuation of intangibles in a post-COVID-19 environment, identifying useful tools and analyses for mitigating valuation related risks in this more uncertain environment.

Read the full article here.

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