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Commercial Business Valuation, Cost Seg, Financial Forensics

Commercial Business Valuation, Cost Seg, Financial Forensics Commercial Business Valuation, Cost Seg, Financial Forensics Commercial Business Valuation, Cost Seg, Financial Forensics

ASC 805 Purchase Price Allocation - Business Combinations

Purchase Price Allocation is the process of allocating the Purchase Price Paid for Acquired Company to its Tangible Assets, Intangible Assets, and Assumed Liabilities.

Combinations

Tangible Assets 


Real Property: Land, Land Improvements, Buildings, Leasehold Interests 


Personal Property and Related Assets: Machinery and equipment, Furniture and fixtures,  Computer equipment, Vehicles, Construction in progress,  Leasehold improvements


Intangible Assets:   Trademarks, Patented and unpatented technology, Internal-use software, Customer relationships,  Favorable supply agreements, Noncompete agreements, Licensing agreements  


Liabilities: Deferred revenue, Contingent considerations, Contingent liabilities

Tax Implications

Purchase price allocations performed for US tax purposes are done under the standard of fair market value, which is similar to fair value, but which also may differ in certain cases. IRS Section 1060 and Regulation under IRC Section 338 further identify the following seven classes of assets for tax purposes:   


Class 1 Cash  


Class 2 Marketable Securities  


Class 3 Market-to-Market Assets and Accounts Receivable  


Class 4 Inventory  


Class 5 Assets not Otherwise Classified  


lass 6 Section 197 (intangible) Assets other than goodwill and going concern value


Class 7 Assets  - Goodwill and Residual Going Concern Value   


These classifications are extremely important if a company is contemplating a like-kind exchange, a tax-free exchange of stock, or other corporate tax planning transactions.

Purpose of Purchase Price Allocation

Financial Reporting: ASC 805, Formerly SFAS 141r and 142


 •It accurately reflect Components of a Company's Worth 

•Most Intangible Assets are Amortized over their expected lives; This Expense can have a major impact on reported earnings

Valuation Process - Summary

•Determine purchase price and total asset base 

•Identify components of total asset base including tangible assets, intangible assets, and remainder as goodwill 

•Allocate Value to Company's Asset Components - Ultimately to the Intangible Asset Valuation

Identification of Intangible Assets

•Identification is dictated by Industry 

•Trademarks/names •Customer contracts & relationships 

•Technology 

•Workforce 

•Patents 

•Databases such as customer mailing lists 

•Non-compete agreements 

•In-process Research and Development ("IPRD") 

•Goodwill


Classifications into Categories: 

•Intangible Assets Separable from Goodwill 

•Intangible Assets Not Separable from Goodwill



Copyright © 2017 Commercial Appraisal & Business Valuation,  Cost Segregation Study, Commercial Real Estate Appraisal, Replacement Cost Appraisal, Capital Assets Valuation, Company Business Valuation, Fairness Opinion, Solvency Opinion, Estate Tax Valuation, Gift Tax Valuation, IP Valuation, - All Rights Reserved.  David Hahn, Certified Valuation Analyst (CVA), Certified M&A Advisor (CM&AA), Certified Commercial Investment Member (CCIM), Master Analyst in Financial Forensics (MAFF), Accredited Senior Appraiser (ASA), California State Certified General Appraiser License #AG009828, CA DRE Broker License #00902122

  • Commercial RE Appraisal
  • Estate Gift Tax Valuation
  • 50% FEMA Appraisal
  • Reserve Study HOA
  • CRT & Donation Valuation
  • Site Selection Process
  • ASC 805 PPA Real Property
  • Hotel Resort Valuation
  • Business Valuation
  • ESOP Valuation
  • Impairment Loss Valuation
  • IP Patent Valuation
  • ASC 805 PPA Business Comb
  • STARTUP, 409a Valuation
  • Transfer Pricing Study
  • Cost Segregation Study
  • CS Partial Disposition
  • CS FOR RENOVATION, UOP
  • Business Interruption App
  • Economic Damages
  • Bankruptcy Valuation
  • Fire Ins Replace Cost App
  • Real Estate Damages
  • Personal Injury, WD, WT
  • CRE Investment Advisor
  • Incentives Advisory
  • Opportunity Zone Overview
  • OZ Who Can Benefit
  • OZ Advisory Services

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