Economic Obsolescence

The loss of value in a technology-based intangible asset caused by the emergence of superior alternatives that render the existing technology uncompetitive or redundant. Technological obsolescence is a critical consideration in valuing software, patents, and proprietary technology, and is distinct from functional obsolescence (design flaws) and economic obsolescence (external market forces).

A loss of value caused by an asset's inability to perform its intended function as efficiently as current alternatives. For intangible assets such as software or process knowledge, functional obsolescence can occur rapidly due to technological advancement, making regular revaluation essential for accurate enterprise value assessment.

A measure of a company's financial performance that calculates the value created above the required return of investors, defined as net operating profit after tax minus the cost of capital employed. EVA highlights whether a firm's intangible and tangible assets are generating returns that exceed their cost of capital.

A form of asset value decline that cannot be economically remedied because the cost of correction exceeds the resulting increase in value, or because the cause is external and beyond the owner's control. In intangible asset valuation, incurable depreciation often arises from economic obsolescence, permanent market shifts, or fundamental changes in regulatory environment.

The process of determining the period over which an intangible asset is expected to contribute to the cash flows of an entity, which governs the amortisation period under IAS 38 and ASC 350. Useful life may be finite (based on contractual, legal, regulatory, technological, or economic factors) or indefinite (when there is no foreseeable limit to the period over which the asset will generate net cash inflows).

A cost-based valuation approach that estimates the value of an intangible asset by calculating the current cost of creating or acquiring a substitute asset with equivalent utility. The replacement cost method is frequently used for valuing assembled workforces, proprietary software, and databases, adjusted for any functional or economic obsolescence.

The period over which an intangible asset is expected to contribute to future cash flows, determining the duration of amortisation. Useful life may be finite (e.g., a patent term) or indefinite (e.g., a perpetually renewed trademark), and its estimation requires careful analysis of technological, legal, and competitive factors.

A measure of market concentration calculated by summing the squares of each firm's market share within an industry. HHI is used by regulators and investors to assess competitive dynamics and is relevant to intangible asset valuation because highly concentrated markets often support stronger pricing power and brand premiums.

Broadcasting Rights: Valuation for Media Companies

How to value broadcasting rights as contract-based intangible assets under IFRS 3. Covers sports broadcasting rights, content distribution agreements, spectrum licences, and the income approach for media rights valuation.