Discounted Cash Flow (DCF)

The cash a company generates from operations after deducting capital expenditures. FCF represents the cash available to pay dividends, reduce debt, or reinvest in the business, and is a key input in discounted cash flow valuations.

Cash flow adjusted to remove non-recurring, extraordinary, or owner-specific items to reflect the sustainable earnings capacity of a business under normal operating conditions. Normalisation adjustments commonly include removing one-time restructuring charges, above-market owner compensation, related-party transactions, and non-operating income.

The smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets or groups of assets. Under IAS 36, when an individual asset's recoverable amount cannot be estimated in isolation, impairment testing is performed at the CGU level.

A valuation methodology that estimates the value of an asset based on the present value of expected future economic benefits, such as cash flows, earnings, or cost savings. The income approach is the most widely used method for valuing intangible assets and includes techniques such as the relief-from-royalty and multi-period excess earnings methods.

A valuation technique that estimates the value of an intangible asset by comparing the projected cash flows of a business with the asset to those without it. The difference in present value represents the asset's contribution and is commonly used to value non-compete agreements, assembled workforces, and technology assets.

A valuation and risk assessment technique that evaluates potential outcomes by modelling different sets of assumptions about key variables such as growth rates, margins, and discount rates. Scenario analysis is essential for intangible asset valuation because the future cash flows attributable to intangible assets are inherently uncertain.

A valuation methodology that estimates the value of an asset based on observed prices in actual market transactions involving comparable assets. The market approach is used to value intangible assets when reliable transaction data or licensing royalty rates are available, and is one of the three primary approaches alongside the income and cost approaches.

The present value of the future cash flows expected to be derived from an asset or cash generating unit, calculated using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Under IAS 36, value in use is one of two measures (alongside fair value less costs of disposal) used to determine recoverable amount for impairment testing.