When deriving the value of a separable intangible, which assumptions should be considered?

When deriving the value of a separable intangible, it is essential to consider market participant assumptions because these assumptions reflect how other potential buyers and sellers in the marketplace would view the intangible asset. This viewpoint provides a more objective basis for valuation, as it incorporates the expectations, risks, and potential synergies that might appeal to current and future market participants.

Market participant assumptions evaluate factors such as the competitive advantage that the intangible might confer, its revenue-generating potential, and how it fits within the broader industry landscape. This approach helps ensure that the valuation aligns with prevailing market conditions, enhancing its relevance and reliability. Utilizing market participant assumptions is crucial because these assets may have different values to different buyers depending on their specific use cases, strategic goals, and capabilities.

While company-specific assumptions could provide insight into how an asset might perform within a particular organization, they may not accurately reflect the broader market dynamics that influence value. Historical company assumptions and global market trends also offer valuable information but do not capture the immediate and subjective perceptions of potential market participants who can drive transactions in the marketplace.