Software Appraisal

What is software?

Software is the non-physical part that refers to a program or set of computer programs that includes data, rules and instructions to establish automated communication to a computer system or intelligent device. Today, it represents a vital tool in any type of process within a company.

Having said the above, it is necessary for companies to know the value of the software they have; this value can be determined by the income it generates directly for companies, or the economic and operational benefit it represents within their internal processes.

What benefits does a Software Appraisal have?

The programs have been gaining more and more importance, at present it is one of the most important tools of an organization, since it automates operations and helps to solve various problems, for the aforementioned it is necessary to have the precise value of the software. and based on that make future decisions.

For the purposes of registration and protection of this intangible asset in Mexico, reference must be made to the Federal Copyright Law and internationally it is responsible for World Intellectual Property Organization (WIPO).

The benefits of software appraisal are:

Justify the purchase or sale of a software asset.
Defense in lawsuits related to software assets (disputes between shareholders, cost justifications of a project, etc.).
Help manage the organization's risks, identifying the most valuable assets and being able to apply the corresponding measures.
Obtain financing, guarantees, etc. thanks to asset value guarantee
Recognition in financial statements and tax deduction.

Valuation service structure by type of software architecture:

What methods do you use for Software Valuation?

Cost Approach

In this approach, the value of an asset is estimated based on the current cost of acquiring or replacing software. Valuation of assets that are not the direct source of a business's earnings.

It is necessary to know the expenses that were needed to develop the same program, for example: the payroll of the programmers, the time required, dedicated servers, resources, licenses, etc.

Market Focus

In the market approach, the value of an asset reflects the price at which a comparable asset is acquired in similar circumstances.

It is required to make comparable software rights transactions or, where appropriate, study the development cost of comparable software with the same characteristics, having this study, it is possible to compare and see an approximate cost.

Income Focus

The income approach is based on the value of the future cash flows that an asset will generate over the remainder of its useful life or in perpetuity (using a terminal value).

The Valuation of this type of assets is considered as part of the direct source of profits of a business.

For this method it is necessary to carry out a financial analysis of the company, taking into account income statements, balance sheets, etc.

How to know if it is an Intangible Asset?

Why is it necessary to carry out a Software Assessment?

It is essential to know the added value of the acquired software to carry out the appropriate assessment and identify the advantages and disadvantages it brings to the company: income, expenses, competitive advantage over other organizations in the same field. The Banks and even the FOCIR (Capitalization and Investment Fund of the Rural Sector that depends directly on the SHCP) They invest in companies with up to 35% of capital, taking the program as guarantee.

They can be for different uses, but those of merger, acquisition, sale, licensing, among others… Ask about our services.