1. Cost Based Approach
The cost approach measures the values of the intangible assets by assessing the expenditures necessary to replace the assets. The cost approach is based on the economic concept of substitution, that is, people will pay no more for an asset than it would cost to develop or obtain another asset with similar functionality. Cost items that should be included when valuing the assets include the legal costs, registrations costs, personnel costs, development costs, production costs and marketing and advertising costs.
2. Market Based Approach
Intangible assets are valued by comparing recent sales or similar transactions with similar assets involved in similar markets. This method is applicable when similar markets and similar transactions exist; however, more than often, comparable assets can’t be found due to the uniqueness of most intangibles which limits the application of this method.