How much is my type collection worth?

barkeep's picture

Hi all,
With changes at work I need a bit of advice.

We have developed a new product and as such have/are going to receive an equity investment. As part of the deal we need to set up a LTD company. Currently my business partner and myself are a Limited Liability Partnership (LLP). Moving to the LTD Company we need to transfer our business assets across into the LLP, part of these for myself would be my type collection.

I have no problem finding out the value of my hardware but I can't seem to find any value for my fonts?
How do you value fonts in a situation like this?

I currently have the Adobe type collection (around 7 years old) and approx £1000 (at purchase price) of additional fonts.

Any ideas?

Martin

Si_Daniels's picture

Having no background in accounting whatsoever, I would probably use the same depreciation calculation for software (fonts) as I did for hardware.

barkeep's picture

Our accountant gave me one of those "looks" when she saw how much I have spent on type :-)

kentlew's picture

Just remind your accountant that these are the tools of your trade.

jabez's picture

Something I found on this topic:

There are various types of cost estimation methods used by appraisers in the software valuation process. Among these methods, the various algorithmic models are generally considered to be the most reliable and the most supportable.

http://www.allbusiness.com/business-finance/equity-funding-private-equity-venture/347935-1.html

Nick Cooke's picture

Hmmm... Interesting question, it would be hard to quantify as you only own the licences for the fonts, not the actual fonts thselves. Therefore they are not yours to sell on, so in reality worth nothing, apart from as a legitimate business expense.

Si_Daniels's picture

Some font licenses allow transfers. Also the hardware (printers, Macs) include licensed software, how would you calculate what % of a Mac Book's depreciated value is in the physical components and how much is in the software Apple put on it? Not to mention the difficulty in quantifying the value of its magical powers.

barkeep's picture

Thanks for the thoughts
as for the transfers of license, there is no transfer as it is effectively just a change of name (more of a accountancy exercise).
does not accurately represent the true value of an item, especially with Apple hardware,
i.e According to my accountant my MAC Pro should be worth 1/3 its value now (based on depreciation over 3 years), however Ebay and secondhand site suggest it has only lost £300 of value? Most confusing especially when my 3 year old G5 recently sold for £800 This leads to a problem calculating how much my font collection is worth>

"it would be hard to quantify as you only own the licences for the fonts, not the actual fonts thselves."
This is true but since I am still the licensee I simply need to know how much these are worth to the new company (tax reasons), are fonts worthless once bought? or do they change value? For instance my upgrade to CS4 has been valued by our accountant at £800 even though it is only valid on my one desktop?

most confusing
martin

barkeep's picture

Another though, I own the license to the fonts, why would I not be within my rights to resell what I have bought in it's entirety?
Our lawyers certainly think it is valid to do so.
help!!!!

Nick Shinn's picture

Strictly speaking, you would have to read each foundry's EULA, to see what it says about transferring your licence.
IIRC, Adobe permits it, but I'm pretty sure that isn't always the case.

Igor Freiberger's picture

I don't think hardware or usual software depreciation are suitable here. Their depreciation rates are very high due to quick obsolescence.

But a font license would be used without any kind of obsolescence for many years. Just after a long renew in general technology one finds a font really deprecated –and even in this case, this may be surprisingly slow.

Take the Type1 transition to OpenType: after a decade, OT is still under adoption and T1 is still perfectly usable.

This, of course, is from the technological point of view. In terms of design, culture and marketing, a new font is more valuable than a massively used one. But even in this case, the velocity is slower than you may find in other design areas. Trends in car, web or clothing design become 'old' after two or three years (in some case, even earlier). A font surely not.

An annual 7% depreciation seems to be a logical rate (so you're estimating the font has about 14 years of usage). In accounting practice, for example, hardware/software are depreciated at a 20–30% annual rate.

Bert Vanderveen's picture

I consider software (and thus fonts) to be a business expense and do not depreciate that, but do a 100% write-off. This practice has been validated by the Dutch Tax Office (at least in my 20-odd years of digital design).

James.S.Welsh's picture

Depreciation rules vary from country to country. For instance here in Canada the "Captial Cost Allowance" for software was recently changed so the full value of software could be depreciated in one year rather than over 3. However assigning a value for legal purposes may be different from those used for tax calculations. You need to consult an accountant. Usually you'd use "fair market value" (what you'd expect to sell it for on eBay, for instance) or "book value" (the asset value you have identified in your accounts).

kentlew's picture

Or perhaps “replacement value” — what it would cost a new business to acquire equivalent assets?

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