Embedded Value (Insurance)

The estimated value of a business or asset beyond the explicit forecast period in a discounted cash flow analysis, representing the bulk of total enterprise value for long-lived assets. Terminal value is calculated using either a perpetuity growth model or an exit multiple approach and is particularly significant for intangible-intensive companies with long-duration competitive advantages.

The International Financial Reporting Standard that defines fair value, establishes a framework for measuring it, and requires disclosures about fair value measurements. IFRS 13 introduces a three-level hierarchy based on observable market inputs and is foundational to the valuation of intangible assets in financial reporting.

The US GAAP standard that defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

A pharmaceutical product that generates annual revenue exceeding $1 billion, representing a transformational commercial success for its manufacturer. Blockbuster drugs — such as statins, biologics for autoimmune diseases, and oncology treatments — drive the majority of pharmaceutical industry profits and are among the most valuable intangible assets in existence.

The integration of financial services — such as payments, lending, insurance, or investment — directly into non-financial platforms and customer journeys. Embedded finance enables companies like e-commerce platforms, SaaS providers, and gig economy marketplaces to offer financial products without becoming licensed financial institutions, typically through Banking-as-a-Service partnerships.

The price at which an asset would change hands between a willing buyer and a willing seller, neither being under compulsion to transact, and both having reasonable knowledge of the relevant facts. Fair market value is the standard used in most asset valuation contexts.

A standardised set of actuarial survivor curves developed at Iowa State University that describe the retirement patterns of industrial property. Iowa curves are classified by shape (L, S, R, O types) and average service life, providing a systematic framework for modelling asset mortality.

The estimated value of an asset at the end of its useful life or the end of a forecast period. In intangible asset valuation, residual value considerations are important for assets with finite lives, such as patents approaching expiration, as well as for terminal value calculations in discounted cash flow models.

How do you value a franchise agreement as an intangible asset?

Franchise agreements are valued using the income approach based on the present value of franchise fee income and royalty streams over the remaining agreement term, adjusted for renewal probability.

What is goodwill impairment and when does it occur?

Goodwill impairment occurs when the fair value of a business unit (cash-generating unit) falls below its carrying amount — goodwill is written down, reducing reported earnings.

How does IAS 36 impairment testing work for intangible assets?

IAS 36 requires comparing the carrying amount of an asset or cash-generating unit to its recoverable amount (the higher of fair value less disposal costs and value-in-use). If carrying exceeds recoverable, an impairment loss is recognised.

How do you test goodwill for impairment under current accounting standards?

Goodwill impairment testing compares the carrying amount of a cash-generating unit to its recoverable amount (higher of fair value less costs to sell and value-in-use), with any shortfall recognised as an impairment loss.