Accounting for trademarks – indefiniteness is no more than an interim solution
While valuators tend to describe trademarks as having an indefinite life, this is seldom the case. However, there are various ways to estimate a mark’s remaining useful life, which can be beneficial for accounting
The value of an intangible asset is based on its useful life, among other factors, such as its ability to generate cash inflow and risk. For trademarks, valuators regularly opt for an indefinite life when there are no obvious factors to limit the mark’s future economic life. However, almost all brands are finite and only a small proportion have the potential to last for a hundred years or more. Assuming indefiniteness can have two serious effects – one relating to value and one to accounting. This article discusses such effects and suggests some guidelines and tools to analyse the lifecycle of a brand and to estimate its remaining useful life (RUL). It also presents new research that examines indefinite-lived trademarks in European jurisdictions and traces their reporting over the past 10 years.
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