Purchase Price Allocation in Accordance with FASB’s ASC 805 (SFAS 141R)
Business combinations and asset purchases bring about a number of financial reporting requirements that must be addressed. Companies with GAAP based financial statements must comply with the guidance set forth in Accounting Standards Codification 805 (“ASC 805”, formerly referred to as “SFAS 141R”) recognizing and allocating the value of the assets acquired and liabilities assumed as a result of an acquisition.
What is ASC 805?
Accounting Standards Codification 805 (formerly SFAS 141R), commonly referred to as a “purchase price allocation”, provides accounting guidance to allocate the premium paid above net book value in a merger or acquisition to both the tangible and identifiable intangible assets acquired in the transaction, including goodwill. The fair values of acquired tangible assets or identifiable intangible assets are estimated and reported on the balance sheet. The residual amount of consideration paid in the acquisition over the fair values of acquired tangible assets or identifiable intangible assets is then booked as goodwill. Goodwill and other indefinite-lived intangible assets tested for impairment annually in accordance with ASC 350.
Our experts use commonly accepted valuation methodologies to derive supportable valuations for tangible and intangible assets. We prefer to engage the audit team early in the process to better facilitate the review process and reduce the time and burden on management. Our work is well-respected by the Big Four and regional accounting firms.
For more information about our valuation services contact:
Jamison Carson, CPA/ABV
Managing Director – Valuation Consulting Practice