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Purchase Price Allocations for Mergers & Acquisitions

Purchase Price Allocations (“PPA”) are required by International Accounting Standards Board (IASB), International Financial Reporting Standards (IFRS) and US GAAP for all acquisitions. The Indian GAAP is also in process of converging to IFRS with the introduction of IndAS.

PPA requires companies to report the Fair Value of assets and liabilities acquired in their financial statements. The PPA 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.

The purpose is greater transparency to investors. PPA is a complex, technical and organizationally challenging process. Particular emphasis should be placed on the information required to be disclosed. Goodwill must be disclosed to the capital markets. The amount of residual goodwill can provide indications as to the reasonableness of the purchase price.

The central challenge of a PPA lies in the identification and valuation of the intangible assets not previously reported by the acquiree i.e. where the balance sheet recognition criteria were not met previously.

This starts with identification of the acquiring company and determining the date of acquisition. An analysis of business plan is conducted which enables identification of central value drivers of the acquired company and provides an understanding of the amount and composition of the purchase price.

RBSA has executed numerous complex cross-border Purchase Price Allocations involving leading corporates, across various continents. Our qualified experienced professionals have experience in a wide range of valuation issues. We specialize in the identification and valuation of intangible assets and we offer our experience with goodwill impairment and PPA across a broad range of industries. We also have alliances with other leading consulting firms in US, Europe and other parts of the world in order to provide clients seamless cross-border services.

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