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A brand is a valuable asset for businesses in Vietnam. In many cases, brand valuation is necessary to support activities such as capital investment, buying and selling of businesses, mergers, acquisitions, licensing of trademarks, legal proceedings in trademark disputes, or handling bankruptcy procedures for businesses. So, how many methods of brand valuation are there in Vietnam, and how is each method implemented?
What is Brand Valuation?
Brand valuation is the process of determining the monetary value of a brand in a specific market, at a certain location and time, for a particular purpose, and is conducted according to valuation standards.
Cases Requiring Brand Valuation in Vietnam
Brands are valued in specific cases such as:
– Inventory and assessment of a business’s assets.
– Capital investment using a brand or participating in business divisions, splits, mergers, acquisitions, or sales.
– Using a brand as collateral for loans from financial institutions.
– Transfer or assignment of trademark rights.
– Supporting dispute resolution activities of litigation agencies.
– Determining the brand’s value for liquidation in cases of business dissolution or bankruptcy.
– Identifying measures and costs to protect the brand (registration, renewal, etc.).
Legal Framework for Brand Valuation under Vietnamese law
The legal provisions related to brand valuation are scattered in various documents, including the Price Law, implementing decrees and regulations of the Price Law on valuation, and the system of valuation standards in Vietnam.
Standard No. 13 on the valuation of intangible assets, issued by the Ministry of Finance through Circular No. 06/2014/TT-BTC on January 7, 2014, is considered the most important document as it regulates different approaches to determining the value of intellectual property assets in general and brands in particular. Each approach includes various valuation methods.
Brand valuation services are conditional businesses. Organizations providing valuation services must comply with the establishment and operation conditions stipulated by Vietnamese law. Valuators must also meet professional qualifications and adhere to professional ethics during the valuation process.
Methods of Brand Valuation in Vietnam
Specific methods of brand valuation are stipulated in Standard No. 13 on the valuation of intangible assets, issued in conjunction with Circular No. 06/2014/TT-BTC on January 7, 2014, by the Ministry of Finance.
These methods of brand valuation include:
Market Approach:
The value of the intellectual property asset to be valued is determined by comparing and analyzing information about similar intangible assets with transaction prices on the market. At least three similar intellectual property assets are used for comparison. This method can also be used in conjunction with other methods.
Advantages of this method include the use of market data, which makes it the most reliable. However, the disadvantage is that each transaction of an intellectual property asset is unique, making it challenging to find a similar agreement for valuation purposes.
Cost Approach:
The cost approach estimates the value of ownership of intellectual property based on the cost to recreate the intellectual property asset similar to the one being valued, taking into account replacement costs to create an equivalent intellectual property asset with the same function and utility as per the current market price.
The estimated value of the intellectual property asset = Reproduction cost (Replacement cost) – Accumulated depreciation + Producer’s profit (where the producer’s profit is determined through comparison, investigation, and survey methods).
The cost approach includes two main methods: the reproduction cost method and the replacement cost method.
- Reproduction cost method: This method calculates the value of an intellectual property right by calculating the cost to create an asset similar to the intellectual property right being valued based on the current market price.
- Replacement cost method: This method calculates the value of an intellectual property right by calculating the cost to replace that asset with a similar one with the same function and utility based on the current market price.
Income Approach:
The income approach determines the value of an intellectual property asset based on the present value of estimated income, cash flows, and cost savings generated by the intellectual property rights. This method focuses on the estimated income that the intellectual property owner expects to receive during the intellectual property’s effective period.
The income approach includes three main methods: the rights-to-use method, the excess profit method, and the incremental income method.
- Rights-to-use method: This method calculates the value of an intellectual property right based on the current value of cash flows generated by using the intellectual property right, minus taxes (if any).
- Excess profit method: This method determines the value of an intellectual property right based on the difference in the present value of two discounted cash flows: one when the intellectual property right is used to generate additional profits for the entity and one when it is not used.
- Incremental income method: This method calculates the value of an intellectual property right based on the current value of incremental cash flows generated by using the intellectual property right, minus taxes (if any).
Documentations of Brand Valuation in Vietnam
The documentation required for brand valuation includes the following:
- Request for valuation.
- Certificates of protection for intellectual property rights established through registration or documents proving ownership of intellectual property rights not subject to registration.
- Other relevant documents related to the subject of valuation.
Intellectual Property Service in Vietnam
We are a professional organization operating in the field of Intellectual Property in Vietnam. With a team of lawyers holding specialized training certificates in the field of intellectual property, we take pride in providing services related to intellectual property in Vietnam for domestic and foreign organizations and individuals at reasonable costs.
Contact us now for advice and assistance in quickly and professionally completing the procedures related to intellectual property in Vietnam.
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DCNH LAW
Address: 38B Tran Nhat Duat, Phuoc Hoa ward, Nha Trang city, Khanh Hoa province, Vietnam.
Phone: (+84) 343320223 – 974278893
Email: [email protected]
