Introduction

• Author: Garry Foster, FCA
• Profession: Vice Chairman, Deloitte
• Pages: 13-14

Introduction

It would be diff‌icult to identif y two more rapidly evolving elements of the

broader economy than technology and tax regulation. Taxation & Valuation

of Technology analyzes how the normal challenges that exist in the account-

ing, auditing, and valuation of a bu siness are magnif‌ied where technology

is concerned. Technology companies and tec hnology assets are unlike old

economy tangible assets. Whereas tangible assets possess a long-term phys-

ical existence, are straightforward to identif y, and are relat ively diff‌icu lt to

relocate, this is not the case w ith technology. Technology is typically intan-

gible in nature — offering no physical existence — and its value is derived

from intellectual or legal rig hts.

Business valuators seek to use established empirical d ata and accepted

methodologies to ana lyze historic operating per formance and evaluate fu-

ture cash f‌low projections. The exponential rate of chan ge att ributable to

technology companies and also technology’s impact on more traditional

companies serves to make the quantif‌ication of value at any specif‌ic point

in time a signif‌icant challenge. Quantif‌ication becomes much more f‌luid

and, as a consequence, th is demands adaptation of established valuation

methodologies. Moreover, future cash f‌low projections are often without

any historic reference or suitable current comparables.

Technology presents no less of a challenge for governments a nd their

national tax regimes. Tax regulations seek to encourage the productivity

benef‌its and economic growt h provided by developing and adopting tech-

nology assets while at t he same time protect ing against t he corresponding

shift in the “value” of the tax base toward those very assets. Given the mobil-

ity of technology and the sensitivity of high-growth companies to claims on

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