Behind every physical product and manufacturing process lies a body of technical documentation — engineering drawings, process designs, CAD files, specifications, tolerances, assembly instructions, and testing protocols — that represents years of accumulated engineering investment. Under IFRS 3, these process designs and engineering drawings are classified as technology-based intangible assets.
While rarely the headline asset in an acquisition, process designs and engineering drawings can represent substantial value in manufacturing, engineering, construction, and industrial businesses. The documentation encodes the knowledge needed to produce the product or operate the process — without it, the physical plant and equipment are significantly less valuable.
| Asset Type | Description | Examples |
|---|---|---|
| Product engineering drawings | Technical specifications for manufactured products | CAD files, assembly drawings, component specifications |
| Process flow diagrams | Documentation of manufacturing or operational processes | P&IDs, process flow sheets, control logic diagrams |
| Tooling and fixture designs | Specifications for manufacturing tools and jigs | Tool drawings, fixture designs, mould specifications |
| Quality and testing protocols | Procedures for ensuring product quality | Test specifications, acceptance criteria, inspection procedures |
| Installation and commissioning docs | Technical documentation for field deployment | Installation manuals, commissioning procedures, safety documentation |
Process designs and engineering drawings are the encoded knowledge that makes manufacturing possible. They are identifiable through separability (they can be transferred — engineering packages are routinely sold or licensed in technology transfer agreements) and they have measurable fair value through the cost to recreate them.
The cost approach is the standard method for process designs and engineering drawings because these assets rarely generate direct revenue — their value lies in enabling the manufacturing of revenue-generating products.
Catalogue all engineering documentation by type, complexity, and currency. Identify which drawings are current (actively used in production) versus superseded or obsolete.
For each category, estimate the engineering hours required to recreate equivalent documentation. A complex assembly drawing may require 40-80 hours; a simple component drawing, 4-8 hours.
Use market rates for equivalent engineering talent. Include fully-loaded costs: salary, benefits, supervision, CAD software licences, and overhead.
Apply functional and economic obsolescence adjustments. Drawings for outdated products, superseded processes, or discontinued product lines have reduced or zero value.
| Role | Typical Fully-Loaded Hourly Rate (UK) | Common Tasks |
|---|---|---|
| Junior design engineer | £40-60 | Component drawings, simple modifications |
| Senior design engineer | £60-90 | Complex assemblies, system integration |
| Process engineer | £65-100 | Process design, P&IDs, control systems |
| Specialist (FEA, CFD, stress) | £80-120 | Simulation, analysis, verification |
| Project engineer / lead | £90-130 | Review, coordination, documentation management |
An industrial equipment manufacturer is acquired with a technical documentation library comprising 8,500 current engineering drawings, 200 process flow diagrams, and 150 test specifications. Engineering assessment estimates the total documentation represents approximately 120,000 engineering hours. At a blended fully-loaded rate of £75 per hour, the replacement cost is approximately £9 million. After applying a 15% obsolescence adjustment for older designs that would be simplified if recreated today, the fair value is approximately £7.7 million.
Process designs and engineering drawings interact with other technology-based intangible assets:
In practice, the engineering drawings capture the "what" — the specifications and designs. The manufacturing know-how captures the "how" — the practical techniques, adjustments, and experience needed to actually produce the product within specification. Both are technology-based intangible assets, but they are separately identifiable and valued.
Engineering documentation standards in aerospace are exceptionally rigorous (AS9100, DO-178C). The cost to produce compliant documentation — with full traceability, configuration management, and regulatory approval — is significantly higher than in commercial manufacturing. Aerospace engineering drawings can represent 10-20% of total development cost.
Process designs for pharmaceutical manufacturing (batch records, validation protocols, GMP documentation) are critical intangible assets because regulatory approval is tied to the documented process. Changing the process requires revalidation — making the existing documentation an essential, non-substitutable asset.
Design drawings for construction projects are both an intangible asset and a deliverable. The engineering firm that creates the design may retain copyright while licensing the client to use it for a specific project. This licence arrangement creates a separable intangible asset.
The cost approach for engineering drawings can understate value when the drawings enable production of high-margin products, and overstate value when the drawings relate to commodity products with thin margins. A cross-check against the income approach — estimating the contribution of the process designs to product profitability — helps ensure the cost-based value is commercially reasonable.
Process design and engineering drawing useful lives are tied to the product or process lifecycle:
The shift from paper-based to digital engineering documentation — CAD/CAM, PLM systems, digital twins — has both increased the value and changed the nature of process design assets. Digital documentation is more easily transferred, updated, and integrated with manufacturing systems, increasing its utility and therefore its value. Companies investing in digital engineering are building more valuable technology intangible assets than those relying on legacy documentation systems.
Process designs and engineering drawings are one of ten technology-based intangible assets under IFRS 3. For the full taxonomy, see 35 types of intangible assets. For manufacturing sector intangible assets, read our advanced manufacturing intangible collateral guide.
Tony Hillier is an Advisor at Opagio with over 30 years of experience in structured finance, M&A advisory, and intangible asset valuation. Meet the team.
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