Business Combinations / Purchase Price Allocation
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Our professionals have an in-depth understanding of financial reporting valuation requirements pursuant to ASC 805, Business Combinations (ASC 805) and International Financial Reporting Standard 3: Business Combinations (IFRS 3), enabling us to offer practical insights into key issues of concern to clients, auditors and regulators.
ASC 805 and IFRS 3 are standards with a high degree of convergence, although certain differences between the two remain. Under both ASC 805 and IFRS 3, 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 ASC 805 and IFRS 3 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 SEC and other regulators.
- Acquisition-date fair value measurement of the consideration transferred, any previously-held equity interests and any remaining noncontrolling interests.
- Acquisition-date fair value measurement and economic life analysis of acquired real estate, machinery and equipment, and identifiable intangible assets and intellectual property such as 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 reporting units (cash generating units).
- Legal entity valuations for tax purposes in connection with the business combination.