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Published in:
2021 | OriginalPaper | Chapter
Relief from Royalty
Authors : Marc C. Hübscher, Stella Ehrhart
Published in: Intangibles in the World of Transfer Pricing
Publisher: Springer International Publishing
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Abstract
The relief-from-royalty approach is based on the idea that the fair value of an intangible asset equals the present value of the cost savings realized by the owner of the asset that result from not having to pay royalties for the use of the intangible asset to another party. In order to determine the cost savings, a hypothetical royalty rate has to be calculated for the subject asset, based on market comparable royalty rates. As it is less complex and highly transparent in terms of calculation and input parameters the relief-from-royalty approach is a valuation method that is commonly used in practice for the fair value assessment of brands and trademarks, patents, software, and databases. However, since it is largely dependent on market comparable royalty rates, it is essential to apply detailed plausibility and reconciliation considerations in order to derive reliable fair value results.