Companies with a high percentage of their value in intangibles such as in-process research and development (R&D) trade at a high premium to book value. ASC 805 changed the manner in which acquired in-process R&D is accounted for in business combinations. In-process R&D is now valued and recorded as an acquired asset.
Valuation of these intangibles requires a thorough knowledge of the R&D process and the technological environment in which a particular company operates. Technical expertise is needed to judge the feasibility of the technology and potential alternative uses. Financial and marketing expertise are necessary to project reasonable cash flow streams from potential contributions that R&D projects represent to future products.
Knowledge of the regulatory environment is also crucial to the valuation of intangibles such as in-process R&D. The PAG team includes engineers, accountants, financial analysts, and attorneys who focus only on valuation issues. Our high tech industry experience, engineering, business valuation, and merger and acquisition advisory practices help us better understand the context of intangible valuation and convey that understanding to auditors.