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Home / Services / Financial reporting of business combinations

Financial reporting of business combinations

What is a Purchase Price Allocation or PPA?

Companies accounting under International Financial Reporting Standard 3 Revised (IFRS 3R) which acquire another company or business are required to ‘fair value’ the assets and liabilities of that acquired company or business as part of the accounting for the business combination.

This includes identifying acquired intangible assets such as brands, customer relationships and technology and determining their fair value.

The fair value of the identified acquired assets and liabilities is deducted from the purchase price and any residual value is allocated to goodwill. So effectively the purchase price is ‘allocated’ first to the identifiable assets and liabilities with any remaining value going to goodwill

How City Valuation Advisory can help

We work with our clients to assist them through the key steps in a Purchase Price Allocation presenting the results in a report.

In particular our role would typically include the valuation of intangible assets where our report would include:

  • Valuation of intangible assets
  • Details of valuation methodologies applied
  • Key valuation inputs
  • Benchmark data to support the inputs.
  • Detailed valuation calculations

We believe it will be important that the process for preparing the PPA provides valuations that are

  • prepared using industry accepted best practice valuation methodologies
  • based on assumptions which are consistent with the commercial rationale for doing the deal
  • stand up to scrutiny by the company’s auditors
  • undertaken in a cost efficient process and prepared to deadline

We have extensive experience of working with clients in preparing PPAs for small and large transactions – see Credentials for some recent examples

Our services

  • Discount rate determination
  • Disputes
  • Employee share schemes
  • Financial reporting of business combinations
  • Impairment testing
  • Joint ventures
  • Minority shareholdings
  • Restructuring and reorganisations
  • Sale or purchase of a business
  • Strategic reviews

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Contact details:

Email: heather.gray@cityvaluation.co.uk

Telephone:   + 44 (0) 7957 691 777


City Valuation Advisory Limited is a Private Limited Company registered in England and Wales. 

Company registration number: 09535702

Registered office:
23 Chiltern Road,
Sutton,
Surrey
SM2 5QU

 

 

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