Cost approach method.

Stage 3 Identify technology value

Cost approach method

Present by: Ivan Orlando Guarin Ayala Cód: 1013585623 Group: 212032_142

UNIVERSIDAD NACIONAL ABIERTA Y A DISTANCIA - UNAD ESCUELA DE CIENCIAS BÁSICAS, INGENIERÍAS Y TECNOLOGÍAS Valuation and Negotiation of Technology 2022

Cost approach method.

Technology-based assets are part of the wide range of intangible assets that have the fundamental characteristic of being developed from research that seeks to generate innovative impact and allow streamlining existing processes or carrying out novel processes. Technology-based intangible assets vary in nature and include patent rights, trade secrets, know-how, software, databases, and operations guidance.

Through this approach, it is intended to establish, as precisely as possible, the investment made by companies to have today the developments that they present and that they intend to exploit commercially. The cost approach can also be understood as the valuation of the resources necessary to obtain or replace existing assets with others with similar characteristics. This valuation approach is based on the substitution economic principle in which a prudent investor would not pay more for a technological asset than it would cost to create or acquire a similar asset. This is how the cost approach seeks to measure the value of an asset considering the different costs to carry out its substitution for another.

Processes related and mathematical formulas to the calculation

• Initial Value = Initial Cost
• Useful Life = Useful time.
• Years elapsed for analysis = Time of Use
• Depreciation, equals (cost / useful life) * Years elapsed.
• Calculate carrying amount = Cost less depreciation
• Pending useful life, which is the useful life less the years that it has been depreciated.
• Fair value.
• With these data we can begin to analyze the initial price of the technology, how much it has depreciated or revalued and we can infer the cost of replacing it, additionally we can generate calculation tables to analyze and evaluate its benefits or expenses. That benefit the organization.

How can companies create value from their innovation?

The cost approach collects the historical information of the costs that have been incurred to have the current development of the technology-based asset, which requires that organizations become aware of the importance of proper management of accounting and financial information. associated with the development of each asset, since it is there where the history of costs is supported and this allows greater precision in the measurement by this approach.The cost approach allows information to be available for potential negotiations on the exploitation of the asset resulting from the investigation, that is, the cost approach generates a letter of negotiation seeking at least to try to recover the total amount invested and in case of not achieving it, it also fulfills the purpose of being aware of the terms in which the negotiation was carried out and learning for all the actors in the system for future negotiations.

¡Thanks a lot!