IP valuation using the relief from royalty method
Abstract: In today’s business environment, the valuation of intellectual property (IP) is critical — both to comply with accounting rules and for purposes of financial reporting, tax compliance, litigation, or sale or licensing transactions. Several methods can be used to value IP. One of the most effective can be the relief from royalty (RFR) method. This income-based method estimates the portion of a company’s earnings attributable to an IP asset based on the royalty rate the company would have paid for the use of the asset if it didn’t own it.