Under IFRS and many variations of local GAAP, companies are required to allocate the cost of an acquisition to the acquired identifiable assets and liabilities on the basis of their fair values. In addition to the existing assets and liabilities, purchase value can also be attributed to newly identified intangible assets. The final purchase price allocation is subject to discussion with the company’s auditors, who will review the assets identified and valuation procedures performed as part of the audit of the acquirer’s financial statements. The fair values identified in the purchase price allocation can (or, in some cases, must) be tested each year for potential impairment. We assist buyers with a full range of services, from identification of intangible assets to the assessment of fair value and discussions with auditors.
A purchase price allocation can also be performed on a preliminary basis during the financial due diligence phase of an acquisition to estimate the level of future net earnings accretion or dilution post-transaction.