Calculated Intangible Value - CIV


DEFINITION of 'Calculated Intangible Value - CIV'

A method of valuing a company's intangible assets. This calculation attempts to allocate a fixed value to intangible assets that does not change according to the company's market value. Examples of intangible assets include brand equity and proprietary technology.

BREAKING DOWN 'Calculated Intangible Value - CIV'

Usually a company's intangible assets are valued by subtracting a firm's book value from its market value. However, opponents of this method argue that because market value constantly changes, the value of intangible assets changes also, making it an inferior measure. Finding a company's CIV involves seven steps:

1. Calculate the average pretax earnings for the past three years.
2. Calculate the average year-end tangible assets for the past three years.
3. Calculate the company's return on assets (ROA).
4. Calculate the industry average ROA for the same three-year period as in Step 2.
5. Calculate excess ROA by multiplying the industry average ROA by the average tangible assets calculated in Step 2. Subtract the excess return from the pretax earnings from Step 1.
6. Calculate the three-year average corporate tax rate and multiply by the excess return. Deduct the result from the excess return.
7. Calculate the net present value of the after-tax excess return. Use the company's cost of capital as a discount rate.

  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Nonmonetary Assets

    Assets in which the right to receive a fixed or determinable ...
  3. Return On Assets - ROA

    An indicator of how profitable a company is relative to its total ...
  4. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  5. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  6. Brand Equity

    The value premium that a company realizes from a product with ...
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  1. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  2. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  3. Are dividends considered an asset?

    Whether dividends paid on stock are considered an asset depends on which role you play in the investment: the issuing company ... Read Full Answer >>
  4. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  5. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
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    It is a company's board of directors who actually declares a dividend. The declaration date is the first of four important ... Read Full Answer >>

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