Purchase Price Allocation

International Financial Reporting Standard (IFRS-3) and U.S. GAAP accounting rules consider it necessary to perform purchase price allocation (PPA) after a merger and acquisition transaction is completed. PPA aims to allocate the price paid by the acquirer company to purchase the target company’s purchased liabilities and assets, which highlights their fair value.

Our Corporate Finance team is well poised to assist you in efficiently ascertaining whether goodwill or a bargain purchase arose from the business transaction. The team will assess the financial information regarding the purchase consideration paid by the acquirer and the fair value of net assets of the acquiree, as on the acquisition date. Further we will elaborate the Draft PPA Report and undertake necessary discussion with the external auditors.

A poorly performed PPA can negatively impact a business in the following ways:

  • Depreciation and amortization could be under or overstated thereby artificially increasing or decreasing net income
  • Possibility of future impairment of intangibles triggering losses on the financial statements
  • Miscalculation of contingent consideration could lead to under/overstated liability on the books
  • All the above could impact investors’ perception of the business negatively
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