Unlocking the Value: Understanding Intangible Assets in Business Valuation

Posted on June 25th, 2024 in Business Valuations

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When an acquiror obtains control of a business, both the International Financial Reporting Standards (IFRS) 3 Business Combination and Accounting Standards for Private Enterprises (ASPE) Section 1582 require a fair value measurement for assets acquired and liabilities assumed. Unraveling the layers of intangible assets becomes pivotal, and the purchaser’s motivation sheds light on identifying and determining the significance of the intangible assets acquired.

This is the first of a series of articles on intangible assets and the various valuation methodologies and considerations.

The focus of this article is an overview and discussion of the five categories of identified intangible assets and the difference between fair value and fair market value, exploring the characteristics and considerations that play a key role in a valuation.

Five Categories of Identifiable Intangible Assets:

There are five distinctive categories of identifiable intangible assets, encompassing a range of elements vital to business operations. These include, but are not limited to the following:

  1. Marketing-related: Trademarks, trade names, and non-compete agreements.
  2. Customer-related: Customer lists, customer relationships, and customer contracts.
  3. Contract-based: Licensing, supply agreements, royalty agreements, and lease agreements.
  4. Technology-based: Computer software, databases, and trade secrets/formulations.
  5. Artistic-related: Books, scripts, music, and movies.
Fair Value vs. Fair Market Value

IFRS 3 requires intangible assets to be valued using IFRS 13’s definition of fair value: “as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

ASPE 1582 requires intangibles assets valued in a business combination to use the following definition of fair value: “the amount of the consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act.”

In Canada, the definition of fair market value in business valuations is generally defined as: “the highest price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell when both have reasonable knowledge of the relevant facts.”

While the definitions are similar, they are not identical and may lead to a difference in assumptions and have an overall impact to the valuation conclusion.


Navigating the intricacies of business combinations and the valuation of intangible assets requires expertise and precision. For inquiries or assistance in this domain, our Financial Services Advisory Team (FSAT) is ready to guide you through the valuation process and provide assistance. Your understanding of these intangible assets is the key to unlocking the true value embedded in your business.

Article originally published in: FSAT News: Spring/Summer 2024

Article written by: Robert Plenderleith, CPA, CA, CBV, CFF & Rachel Mak, Registered Student of CBV Institute

About the Author

Partner | CPA, CA, CBV, CFF

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