Indefinite Is Not Infinite—Solving a Dichotomy in Trademark Valuation

Authors Christof Binder, Ph.D., MBA, and Robert B. Morrison, MBA, ASA BV/IA, discuss the presumptions of indefinite life valuation for trademarks, and analyze how indefinite lived brands behave on balance sheets over a period of ten years.

The valuation of an intangible asset is based on its useful life. For trademarks, appraisers regularly opt for an indefinite life, when no obvious factors exist that would limit the future economic life of the trademark. However, almost all brands are finite, and assuming indefiniteness can have two serious effects: one on value and one on
accounting. This article discusses such effects and suggests some guidelines and tools for how to analyze the life cycle of a brand and how to
estimate its remaining useful life (RUL). It also presents new research that examines indefinitelived trademarks and traces their reporting over
the past 10 years.

The article was published in Business Valuation Update, Vol. 21, No. 5, May 2015. Get the full article here.