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Purchase Price Allocation

Purchase Price Allocations are required by the US Financial Accounting Standards Board (FASB) and International Financial Reporting Standards (IFRS) for all acquisitions. Purchase Price Allocation requires US and international companies to report the Fair Value of assets and liabilities acquired in their financial statements. The Purchase Price Allocation process allocates the cost of an acquired entity to the Fair Value of assets acquired and liabilities assumed and it establishes useful lives for identified assets. In addition, the rules accompanying Purchase Price Allocations require companies to assess the fair value of recorded goodwill and identifiable intangible assets on at least an annual basis and sometimes more often.

The purposes of the Purchase Price Allocation requirements are for greater transparency to investors. But the rules also allow greater subjectivity in the allocation of assets as amortizable or non-amortizable and greater accountability for the acquirer. Subjectivity is involved in Purchase Price Allocation with estimating the future value potential of brands, technology, customer relationships, goodwill, and how the acquirer recognizes and measures its acquired intangible assets will impact its future earnings. Intangible assets' amortized charges will impact the acquirer's future earnings by reducing the book value of acquired intangible assets on the balance sheet, thereby reducing the risk of future impairments. Value allocated to goodwill (or longer-lived intangible assets) may not reduce book value but can have an increased risk of future impairment. These factors must be considered in creating valuation models for the acquired assets in the Purchase Price Allocation.

Intangible Business has performed numerous complex, cross-border Purchase Price Allocations involving legal entities on every continent. Our qualified, experienced professionals are part of a worldwide network with experience in a wide range of valuation issues. Our talented staff includes accountants, lawyers, and marketing experts. All staff are valuation experts and have industry-specific backgrounds. We specialize in the identification and valuation of intangible assets and we offer our experience with goodwill impairment and Purchase Price Allocations across a broad range of industries. Our Purchase Price Allocation deliverables include an independent and objective formal report including facts and analyses to support generally accepted valuation methodologies and conclusions in a format suitable to auditors, the SEC, The International Stock Exchange and other regulatory bodies.

Example Cases