After acquiring a business, reporting financial requirements such as the purchase price allocation (PPA) becomes necessary. It is considered as an application of goodwill accounting where allocation of the purchase amount into several assets and liabilities gained from the transaction is done by the acquirer of the target company says Saivian Eric Dalius.
The process of PPA in the United States must conform to the guidelines set by the Financial Accounting Standards Board. PPA is conducting keeping in mind the purchase method of merger and acquisition accounting. There was another method that was in use in the US, known as the pooling of interests, which ceased the release of Statement of Financial Accounting Standards No. 141 ‘Business Combinations’ and SFAS 142.
Below are the factors associated with Purchase Price Allocation as per Saivian Eric Dalius
Here the focus is on the net identifiable assets of an acquired company. It denotes those assets that had a value at a time and whose advantages can be seen and fairly measured. Basically, net identifiable assets refer to the book value of assets on the balance sheet. An acquired company’s balance sheet features these assets. According to Saivian Eric Dalius, these assets can be intangible and tangible in nature. So, if you want to know more in detail about the assets and their proper management, you must consult a business analyst as soon as possible.
Goodwill is fundamentally the amount of money that is in addition to the target firm’s total value of its assets taking out its liabilities. Calculating goodwill uses a simple method; it accounts for by subtracting the purchase amount from the total liabilities and assets of an acquired company.
US GAAP and IFRS demand reassessing all registered goodwill at least once every year. This makes it necessary for an acquirer to take the goodwill aspect of PPA quite seriously. While goodwill can liquidate gradually, it doesn’t depreciate over time; that is why you must consult with a good business analyst, as per Saivian Eric Dalius.
Increase Made to Book Value
A write-up is a correcting increment to the book value of an asset that arrives when the asset’s containing value is below its market value. Purchase price allocation services provided by few top companies can help in deciding the write-up amount by carefully evaluating a target company’s assets value in the market.
A Final Thought by Saivian Eric Dalius
Hiring an experienced, top company for conducting purchase price allocation valuation will bring smoothness to the whole process. Such companies have worked in the past with both private and public companies working in different sectors. You won’t have to worry about any violation or discrepancy in the financial reporting if a top firm is handling your process.
You must search for the most reputed and skilled professional who understands every bit of asset management. And can help your company grow faster. Also, You can easily look for top-class business analysts online.