PURCHASE PRICE ALLOCATION
MARSHALL S TEVENS
FASB ASC 805 (FORMERLY SFAS 141R )
HOW CAN FASB ASC 805 AFFECT YOUR FINANCIAL REPORTING? Fair Value (FV) determinations by Marshall & Stevens make an essential difference in financial reporting. How you allocate the purchase price, how much you assign to each category of identifiable assets, and how much goes into nonamortizable goodwill can determine whether future earnings from the acquisition are accretive. Inasmuch as most buyers want any acquisition to be accretive, the allocation is extremely important. As acquisitions become more complicated and price allocation requirements are increasingly important in financial and tax reporting, Marshall & Stevens works to maximize value for acquisitions, large or small. From valuation of IPR&D, contingent payments, liabilities, the new definition of Fair Value, the new bargain purchase allocation rules, and other significant changes that impacts EPS, Marshall & Stevens is your reliable partner to value your next acquisition.
WHAT IS PURCHASE PRICE ALLOCATION? The basic concept of this requirement, newly termed FASB ASC 805, is that the purchase price, including the assumption of any debt, has to be allocated over all the assets acquired. By definition, the difference between the sum of the asset values and the total purchase price (including the assumption of debt) is designated as goodwill. This requires a determination by a valuation specialist of the fair value of the tangible and intangible assets and liabilities acquired.
ALLOCATION SERVICES INCLUDE VALUATIONS OF: + Intangible Assets - Customer Lists, Contracts and Relationships - Trademarks, Trade Names, Patents, Software, and IPR&D + Contingent Liabilities + Real Estate Owned - Land - Site Improvements - Tenant Improvements - Real Estate Intangibles + Real Estate Leases + Machinery & Equipment, Furniture, Fixtures and Vehicles
LOS ANGELES
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NEW YORK
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PHILADELPHIA
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CHICAGO
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ST. LOUIS
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TAMPA
CURRENT CHANGES Acquisition accounting and valuation under FASB ASC 805 - Business Combinations has changed dramatically since the original implementation of SFAS 141, including: 1. Traditional asset purchases may now be categorized as business combinations, if the assets being acquired are capable of being conducted and managed as a business (a potential return to investors, lower costs or other economic benefit); 2. Bargain purchases must include a valuation of all assets and liabilities without downward adjustment to meet the purchase price; 3. Acquired IPR&D must now be valued and capitalized (internally developed IPR&D continues to be expensed); 4. Contingent liabilities must now be valued, capitalized and considered part of the purchase price (i.e. warranties, earn-outs, law suits, environmental); 5. The valuation date for acquisition accounting purposes will now be the date the transaction closed, not the date the deal is announced or the agreement is signed; 6. Transaction-related costs, such as banking/advisory, legal, accounting, and valuation, will be expensed as incurred and not capitalized as part of the purchase price.
COMPANY OVERVIEW Established in 1932, Marshall & Stevens is a recognized leader in valuation, serving business owners, managers, boards and trusted advisors throughout the world. We assist our clients with planning, due diligence, negotiation and reporting issues related to their mergers, acquisitions, divestitures, financing, insurance placement and tax related transactions. Our in-house specialists provide a full complement of valuation-related services, from transaction advisory and opinion letters to the valuation of businesses and business assets, both tangible and intangible.
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