Secured Lending on Intellectual Property Rights in India: Issues on Valuation

Abstract

Valuation is a critical exercise for commercial enterprises, as it is used to assess the best possible value for various transactions. It has been observed that many of these transactions involve intangible assets, including intellectual property (IP) assets. However, present Indian valuation standards treat IP rights as a class within intangible assets, which affects the realization of the true value of IP. As enterprises push towards maximizing value from IP assets, the ability to avail credit backed by such assets from traditional financial organizations in India, through a transparent mainstream process, will be one of the focal points of consideration. However, this will require a standardized valuation approach that can be clearly understood and applied by all the stakeholders. This paper presents a method to identify and value IP in its own right, in light of applicable Indian accounting standards and that of some leading economies of the world.