ABV Goodwill & Intangible Asset Valuation 2

Question 1

Which of the following best defines 'assembled workforce' in the context of purchase price allocation?

Accepted Answer

A contributory asset used in the MPEEM but not separately recognized under ASC 805

Answer

Under ASC 805, assembled workforce does not meet the separability or contractual-legal criterion for separate recognition and is therefore treated as a contributory asset in valuation models, not a separately recognized intangible.

Question 2

The 'greenfield method' is most often used to value which category of intangible assets?

Accepted Answer

Licenses and operating permits with long remaining terms

Answer

The greenfield method models the hypothetical cash flows required to replicate a business from scratch without the subject intangible (e.g., a license or permit), thereby isolating the value of that intangible.

Question 3

When estimating the useful life of a customer relationship intangible, which analytical approach is most commonly used?

Accepted Answer

Historical customer attrition or churn rate analysis

Answer

Analysts typically use historical customer attrition (churn) data to construct a survival curve, which drives the economic useful life estimate for customer relationship intangibles.

Question 4

Under IRC Section 197, which of the following intangibles must be amortized over 15 years for tax purposes?

Accepted Answer

Goodwill and going-concern value acquired in an asset acquisition

Answer

IRC Section 197 requires goodwill and going-concern value (along with most other acquired intangibles) in an asset purchase to be amortized straight-line over 15 years regardless of their economic life.

Question 5

Which metric is most commonly used to benchmark royalty rates when applying the relief-from-royalty method to technology intangibles?

Accepted Answer

Rates observed in arm's-length licensing transactions for similar technologies

Answer

Market-observable arm's-length royalty rates from comparable licensing agreements (often sourced from databases such as RoyaltySource or ktMINE) provide the primary benchmark for selecting royalty rates.

ABV - Accredited in Business Valuation Practice Test

ABV - Accredited in Business Valuation Practice Test

ABV Goodwill & Intangible Asset Valuation 2