Business Combinations/Purchase Price Allocation
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Our professionals have an in-depth understanding of financial reporting valuation requirements pursuant to International Financial Reporting Standard 3: Business Combinations (IFRS 3), Accounting Standards for Private Enterprise 1582: Business Combinations, (ASPE 1582) and ASC 805, Business Combinations (ASC 805) enabling us to offer practical insights into key issues of concern to clients, auditors and regulators.
IFRS 3 and ASC 805 are standards with a high degree of convergence, although certain differences between the two remain. Under both IFRS 3 and ASC 805, the purchase price of an acquisition is allocated to the identifiable assets acquired and liabilities assumed at fair value, with limited exceptions. The identifiable finite-lived assets are then depreciated/amortized over their remaining useful lives.
Kroll can help you address complex valuation issues arising in the context of IFRS 3 and ASC 805 throughout the transaction continuum, including:
- Pre-acquisition pricing analysis, including estimation of accretion/dilution impact on earnings by providing preliminary values and economic lives for assets to be acquired
- Valuation or structuring of contingent consideration with our team of specialists in our Strategic Value Advisory practice and modeling potential future earnings impact
- Valuation of contingent assets and liabilities
- Pro-forma allocations required for filings with the OSC, the SEC and other regulators
- Acquisition-date fair value measurement of the consideration transferred, any previously-held equity interests and any remaining non-controlling interests
- Acquisition-date fair value measurement and economic life analysis of acquired real estate, machinery and equipment and identifiable intangible assets, including brands, technology, in-process research and development and customer relationships
- Fair value measurement of contract liabilities (a.k.a. deferred revenue) and other liabilities
- Valuation of options to buy/sell equity interests
- Valuation of derivatives and other financial instruments and their subsequent mark-to-market, when required
- Allocation of purchase price and goodwill to cash generating units, (reporting units)
- Legal entity valuations for tax purposes in connection with the business combination