ICAI Valuation Standard 302 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
ICAI Valuation Standard 302 applies to the valuation of identified intangible assets for the given purpose of valuation. Where an asset incorporates both intangible and tangible elements, the valuer uses judgement to assess which element is more significant — software that a machine tool cannot operate without is treated as tangible; software that is not integral to the hardware is intangible.
What the standard governs
VS 302 is applied for the valuation of identified intangible assets for the given purpose of valuation. Two words in that sentence do real work:
- Identified — the standard values assets that have already been identified as intangible assets; identification comes first and is a separate exercise.
- For the given purpose — the purpose of the valuation shapes the exercise, and a value determined for one purpose is not automatically the value for another.
Intangibles that live on something physical
Some intangible assets are contained in or on a physical substance:
| Intangible | Physical carrier |
|---|---|
| Computer software | A compact disc |
| A licence or patent | Legal documentation |
| Content | Film |
The physical carrier does not determine the classification. The question is which element — tangible or intangible — is more significant, and that is a matter for the valuer's judgement.
The standard gives the boundary case directly. Software for a computer-controlled machine tool that cannot operate without that specific software is an integral part of the related hardware and is treated as a tangible asset. The same applies to a computer's operating system.
When the software is not an integral part of the related hardware, it is treated as an intangible asset.
The test is functional dependence, not physical location. Embedded firmware without which the machine is inert goes with the machine. An application that happens to be installed on it does not.
Identification is not recognition
The educational material makes a point that is easy to elide: identification of an intangible asset does not qualify it for recognition in the books of account. There is separate guidance on when an intangible can be recognised.
This matters practically because a valuer may properly identify and value an intangible — a customer database, a brand — that will never appear on the balance sheet. The valuation is not wrong because the accounting does not follow it; they answer different questions.
Where VS 302 gets used
- Purchase price allocation under Ind AS 103 on a business combination.
- Impairment testing of intangibles and cash-generating units.
- Insolvency — where the February 2026 reforms now require fair value to be computed on the total realisable value of all assets, expressly including intangible assets together with their underlying synergies.
- Transactions — licensing, brand transfers, IP-backed lending.
- Litigation and disputes.
The insolvency use is the one that has changed most. Under the earlier practice intangibles were routinely valued at nil, and the NCLT has held that intangible assets cannot be valued on a negative or nil basis without proper justification.
Compliance checklist
- Confirm the asset has been identified as an intangible before applying VS 302.
- State the purpose of the valuation explicitly; it drives the exercise.
- For mixed assets, record the judgement on which element is more significant, with reasons.
- Apply the functional dependence test to software rather than the delivery medium.
- Do not conflate identification with accounting recognition.
- Never value an intangible at nil without stated justification.
Common mistakes
- Classifying software by its medium rather than its integration with the hardware.
- Assuming an identified intangible must be recognised in the books.
- Valuing at nil because the asset is not on the balance sheet.
- Reusing a valuation prepared for a different purpose.