Purchase Price Allocation

A purchase price allocation (PPA) is the process of assigning the consideration paid in an acquisition to the acquired assets and liabilities at their fair values as of the acquisition date, as required by ASC 805. The PPA determines how much of the purchase price is attributable to tangible assets, identifiable intangible assets, and goodwill. It also establishes the carrying values from which future depreciation and amortization are calculated, affecting reported earnings for years after the transaction.

The most common intangible assets identified in a PPA are customer relationships, developed technology or software, trade names and trademarks, non-compete agreements, favorable lease agreements, and order or production backlog. The specific assets identified depend on the nature of the acquired business. For technology companies, developed technology is often the largest intangible asset. For service businesses, customer relationships typically dominate.

A standard PPA engagement takes four to six weeks from the date we have access to the necessary financial and operational information about the acquired business. More complex situations — multiple entities, significant intangible assets requiring detailed valuation analysis, or international operations — take longer. Most accounting standards allow up to one year from the acquisition date to finalize the PPA, which provides some flexibility.

We typically need the purchase agreement and consideration structure, the target’s audited financial statements, a detailed trial balance as of the acquisition date, information on significant customer contracts and relationships, details on technology or IP assets, and any existing valuations or appraisals. We provide a detailed information request list at the start of the engagement.

The measurement period is the time after the acquisition date during which the acquirer can adjust the preliminary PPA as additional information becomes available. ASC 805 allows up to one year from the acquisition date to finalize the PPA. During the measurement period, changes to the preliminary PPA are recorded as adjustments to goodwill and the related assets or liabilities, not as current period income or expense. We help manage the measurement period process and ensure the final PPA is completed within the required timeframe.

The fair value step-ups recorded in the PPA are amortized over the useful lives of the related assets — typically three to fifteen years for most intangible assets. This amortization is a non-cash expense that reduces reported earnings. For acquisitions with significant identified intangibles, PPA amortization can be material and should be considered in management’s post-acquisition earnings projections and investor communications.

Yes. We regularly work with foreign private issuers and companies with cross-border structures, including IFRS reporting, US GAAP reconciliations, and multi-entity consolidations for companies with domestic and international subsidiaries.

In most cases, we can begin within a few days of finalizing our agreement. Our onboarding process is straightforward — a brief discovery session, a clear statement of work, and secure access setup. We do not have lengthy intake procedures that delay the start of actual work.