ASC Topic 805 Business Combinations, Commonly Referred to as Purchase Price Allocations
FAS 141/ASC 805 refers to the GAAP reporting required for business combinations, generally acquisitions of stock or assets by a private US corporation. A typical PPA engagement is one where an acquiring company purchases a second company or its assets, and then assigns new values to the target's assets and liabilities based on the purchase (transaction) price. The entire purchase price is allocated to the Fair Market Value of the assets and liabilities acquired, including many that might not have appeared on the target’s balance sheet, with any remaining balance assigned to Goodwill.
We work with acquiring companies and their legal and accounting advisers to determine the breadth of assets and liabilities acquired, including intangible assets and intellectual property, and work to quickly help establish the allocations across the balance sheet. We pride ourselves on being responsive and working in fast paced transaction environments.
Our work under Purchase Price Allocation engagements mainly entails ascertaining and providing valuation opinions for the following intangible asset classes:
⦁ Trademarks, Trade names. Internet Domain Names
⦁ Customer Relationship and Customer Lists
⦁ Employment contracts, licensing contracts and operating lease contracts,
⦁ Technology based assets including software, Intellectual property assets, patent, in process R & D
⦁ Non-compete Agreements
⦁ Assembled workforce calculations
While working on PPA engagements we follow the guidance provided by ASC 85 to arrive at the purchase consideration, identify any intangible assets and value them.
Examples of previous PPA engagements we have worked on include the acquisition of a payment processing company by a similar firm, with the consideration being a combination of cash and stock, an acquisition of a Canadian software company by a US services company where the selling owners received a percentage of the post-closing combined company, and sales of various privately held businesses to newly formed subsidiaries of private equity investors.