ABSTRACT
The relief-from-royalty method entails valuing a brand at the present value of the future royalties that the business saves by virtue of owning a brand. Indeed, companies sometimes license the right to use brands for certain products or services. These brands are subject to detailed licensing agreements between the brand owner and the company wishing to use them. The relief-from-royalty method applies, therefore, both an intrinsic logic by discounting future cash flows attributable to the brand and a comparables or market rationale, in that the appropriate royalty rate is estimated using market benchmarks. Brand royalties used are after tax and after deducting the overall costs associated with using the brand. Five steps are necessary to determine the present value of the future royalties: estimate the brand-specific revenue, determine the appropriate royalty rate, estimate the annual costs of using the brand, estimate the useful life of the brand and estimate the appropriate discount rate.
