Title: Methods for evaluating the value of intangible assets

Authors: Jeffrey E. Jarrett

Addresses: College of Business, University of Rhode Island, Data Analytics Ballentine Hall, Kingston, RI 02881, USA

Abstract: Intangible assets, intellectual property, estimating cash flow, and rates of return are concerned with the inaccuracy and biases involved in predicting earnings and rates of return. Financial reporting is the major source of data utilised by economic forecasts, accountants, and financial managers to predict future cash flow and earnings (whether per share or in aggregate). However, the records and studies of analyst forecasts have produced often dismal performance. Previous studies focused on historical analysis of past earnings forecast methodology or on generating evidence that accrual accounting justifies better forecasting performance. Objections to these areas of study come in several forms. Justifying accrual accounting owing to poor performance of earnings forecasts may not be appropriate. Also, the financial reporting of intangible assets is often misleading or is not reported at all. Economic forecasters know that if the reporting of assets that greatly affect cash flow and, in turn, earnings forecasters is a serious source of error in forecasting. Using sophisticated models for forecasting with error adjustments may improve forecast accuracy as shown previously. In turn, the absence of studying intangible assets will still produce inaccurate results.

Keywords: intangible assets; intellectual property; estimation theory; mergers and acquisitions; M&A; earnings forecasts.

DOI: 10.1504/IJBDA.2019.104161

International Journal of Business and Data Analytics, 2019 Vol.1 No.2, pp.145 - 155

Received: 04 Jun 2018
Accepted: 12 Nov 2018
Published online: 20 Dec 2019 *

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