THE ORDER OF THE DEPUTY PRIME MINISTER - THE MINISTER OF FINANCE OF THE REPUBLIC OF KAZAKHSTAN

of August 23, 2022 No. 876

About introduction of amendments to the order of the Minister of Finance of the Republic of Kazakhstan of May 5, 2018 No. 519 "About approval of standards of assessment"

I ORDER:

1. Bring in the order of the Minister of Finance of the Republic of Kazakhstan of May 5, 2018 No. 519 "About approval of standards of assessment" (it is registered in the Register of state registration of regulatory legal acts at No. 16971) the following changes:

state preamble in the following edition:

"According to Item 2 of article 13 of the Law of the Republic of Kazakhstan "About estimative activities in the Republic of Kazakhstan" I ORDER:";

3) of Item 1 to state the subitem in the following edition:

"3) the standard of assessment "Cost types" according to appendix 3 to this order;";

to be reworded as follows the standard of assessment "Value assessment of personal estate" approved by the specified order according to appendix 1 to this order;

to be reworded as follows the standard of assessment "Value assessment of real estate" approved by the specified order according to appendix 2 to this order;

to be reworded as follows the standard of assessment "Measurement bases and cost types" approved by the specified order according to appendix 3 to this order;

in the standard of assessment "Value assessment of intellectual property items and intangible assets" approved by the specified order:

state Item 1 in the following edition:

"1. This standard of assessment "Value assessment of intellectual property items and intangible assets" (further – the standard) is developed according to the Law of the Republic of Kazakhstan "About estimative activities in the Republic of Kazakhstan" taking into account international standards of assessment and establishes the main requirements to approaches and evaluation methods of intellectual property and intangible assets.

The standard is applied to assessment of all types of intellectual property items and intangible assets in the territory of the Republic of Kazakhstan and used by the appraisers having the certificate on qualification assignment "appraiser" on specialization "Value assessment of intellectual property items and intangible assets, business valuation and the rights of participation in business".";

22) of Item 2 to state the subitem in the following edition:

"22) technological assets – represent the value of technological innovations or achievements and arise, including from the non-contractual rights to use technology or are protected by the agreement or the law (the patented technology, the computer software, not patented technology, the database, trade secrets, the current researches and developments, production processes and know-how);";

state Item 8 in the following edition:

"8. The income approach provides discounting of cash flows (future economic benefits) generated by assessment object or capitalization of annual net income (benefits, effect) of assessment object, including the income from possible paid provision to other persons of access to economic benefits from use of object of assessment.

Methods of income approach:

1) method of release from royalty;

2) benefit method in profits;

3) method of surplus revenue;

4) method of residual cost;

5) development method (option method);

6) grinfild method;

7) distributor's method.

In method of release from royalty the cost of intangible assets is determined proceeding from the cost of hypothetical license fees which will be saved thanks to ownership of asset, but not its use according to the license from the third parties.

Hypothetical payments of royalty are adjusted taking into account taxation factors during the term of use of intangible assets and discounted to date of assessment for receipt of their present value. In certain cases payments of royalty include initial fee in addition to the periodic amounts based on percent from revenue or other financial indicator.

For receipt of rate of hypothetical royalty two methods are used:

1) the method based on rates of market royalty according to comparable or similar transactions. Necessary condition of application of method is availability of comparable intangible assets which are transferred in use according to the license on permanent commercial basis;

2) the method based on separation of the profit generated by intangible asset between the licensee and the licensor and determination of that its share which could be hypothetically paid to the licensor for right to use by the estimated intangible asset in the independent commercial transaction between the interested licensee and the interested licensor.

Royalty rates often have considerable dispersion in the market for comparable assets. Therefore it is reasonable to compare the royalty size which is supposed to be used, with indicator of operational profitability demanded by the typical operator of business from sales with use of the estimated asset.

The method of release from royalty assumes the following sequence of actions:

1) determination of size of annual gross operating income according to three probable scenarios (optimistic, pessimistic and realistic) during effective period of the right to the used intellectual property item;

2) determination of share of intellectual property / intangible asset in creation of gross operating income with use of hypothetical rates of royalty;

3) refining of the received size of the income (profit) by means of corrective action on the value and security of intellectual property item which sizes are published in reference books according to property;

4) calculation of size of weighted average price of the capital;

5) calculation of the animator of the income, using annuity model which represents the function depending on the legal term of life of assessment of intellectual property and size of weighted average capital cost;

6) calculation of terminal value;

7) calculation of market value of intellectual property item by method of direct capitalization or discounting of cash flows;

8) calculation of the most probable size of project cost of intellectual property by method of the average weighed results of three scenarios.

By this method the project cost of intellectual property is calculated as the discounted (capitalized) amount of annual revenue business – lines for the settlement term of the license agreement, increased by standard rate of royalty adjusted for the value and security of intellectual property items, participating in creation on this line of cash flow.

The benefit method in profits assumes comparison of the predicted profit or cash flows which would be received by business in case of use of the estimated intangible asset, with those profits or flows which business could receive if he did not use this asset. The method is often used when the rates of royalty based on the market are unavailable or unreliable.

After establishment of difference in profit which would be formed it is necessary to determine the corresponding discount rate applied to reduction of the predicted additional periodic profits or cash flows to current value or the capitalization ratio which is required for capitalization of permanent level of additional profit or cash flows.

The method of benefits in profits is applied as to assessment of intangible assets which use allows to cut down expenses, and for assessment of those assets which use creates additional profit or cash flows which are discounted (are capitalized).

Condition of application of method of benefit in profits is availability of information allowing to determine the expected size of free cash flow which is formed thanks to in this production of the estimated object.

Discounting (capitalization) assumes the following sequence of actions:

1) the pure cash flow created thanks to intangible assets is calculated;

2) the discount rate (capitalizations) is determined;

3) for cash flows which duration exceeds 5 (five) years terminal value is calculated;

4) present value of future cash flows is determined;

5) there is coefficient considering nature of production (individual, serial, mass production);

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