INTERNATIONAL LITIGATION DAMAGES INCLUDING INTANGIBLE ASSETS VALUE

Mihai Berinde () and Dana Petrica ()
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Mihai Berinde: Doctoral School of Economics, University of Oradea, Oradea, Romania,
Dana Petrica: Doctoral School of Economics, University of Oradea, Oradea, Romania,

Annals of Faculty of Economics, 2015, vol. 1, issue 2, 651-657

Abstract: Intangible assets are very different from tangible assets, in substance but also in their nature. Their valuation is more sensitive than the tangible assets’ valuation. Some of them, the ones acquired, are easier to value because there is always the solution to use their book value. But when we talk about goodwill, the things radically change. Usually, the International Accounting Standards – IAS - do not allow companies to record in their books the value of goodwill. This is only recognized when a company is acquired by another company, and the price paid in this transaction is higher than the acquired company’s assets. In cases of international arbitration things are also different; there are some cases judged at International Centre for Settlement of Investors Disputes in which the arbitrators decided to calculate the damages by taking in account the intangible assets of the damaged part. The methods used in intangibles assets valuation are: income approach, market approach and cost approach. In the income approach we can talk about discounted cash flows generated be the intangible asset being valued or about the royalty relief. In international arbitration damage valuation we can also find a global method. This present paper is a brief description of these methods and of their use in some ICSID cases: Siemens v Argentina, Sedcov v NIOC Iran. Amoco International Finance v Iran. The underlined idea of this paper can be summarized like these: by compensation in international arbitration, the damaged part should arrive in the same financial position as if the breach wouldn’t have place. In order to get to this scope, the damages calculated must take in account the whole value of the business of the damaged party, and this is composed from tangible and intangible assets, even if some of the last ones are not record in the books of the company. There are cases where the value of intangibles’ value is a few times higher than the tangibles’ value. Specially, the goodwill value can be very significant. International Accounting Standards defines goodwill as: “An asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised.” (International Financial Reporting Standards®, 2014:1389)

Keywords: valuation methods; goodwill; patents; damages; ICSID (search for similar items in EconPapers)
JEL-codes: F37 F51 K22 (search for similar items in EconPapers)
Date: 2015
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