SINGAPORE – The valuation industry in Singapore received a boost on Wednesday (July 6) when the International Valuation Standards Council launched its Asia office here.
Singapore is the first base for the Council outside Europe, meant to help it drive its advocacy efforts in the region.
The launch also marks a new milestone in Singapore’s growth as a hub for intangible assets, said Minister in the Prime Minister’s Office Indranee Rajah, who spoke at the event at Revenue House.
She said: “Intangible assets, in the form of patents, trademarks, brand image, software, are a major driver of business growth in today’s economy. And their importance will only grow in the years to come, as the global economy becomes more digital, more innovative, and more connected than ever before.”
Ms Indranee, who is also Second Minister for Finance, noted that the top companies today are all firms with significant intangible assets, such as Apple, Microsoft, Amazon, and Alphabet – Google’s parent company.
Over the past three decades, the share of intangible asset market value among S&P 500 companies has also increased from about 60 per cent in the 1990s to about 90 per cent today.
“As a business hub, Singapore recognises the importance of valuation, particularly for intangible assets, to facilitate related transactions and business activities,” she said, adding that Singapore and the Council have a shared goal to promote greater consistency and professionalism in the valuation profession.
This is especially important as South-east Asia – once a traditionally tangible asset-led economy – is shifting to intangible assets, with a growing presence from e-commerce and fintech businesses.
The technological boom in the region has also fuelled record mergers and acquisitions.
“Demand for merger and acquisitions will likely continue to rise, and valuation is critical to ensure that intangibles are fairly valued, so that they can be accurately reflected in their market value during deals,” she said.
“One of the biggest challenges faced by such companies is how to value their intangible assets.”
Companies tend to only disclose intangible value gained through acquisition, as there is an actual dollar figure tied to it, but leave out the value of intangible assets developed by the companies themselves, she added.
This causes a sizeable gap between the actual intangible asset value and what is disclosed.
“Systematic undervaluation of intangible assets can be a serious impediment to growth. It can result in unnecessarily higher financing cost, under-investments in innovation, and damage to long-term value,” she said.