Purchase Price Allocation (PPA) is an important step for a company after it acquires another business. It involves dividing the total amount paid for the purchase among all the assets—both physical and intangible—as well as any liabilities of the company being bought. This process is a key part of business takeovers and asset purchases, including transactions like slump sales and exchanges..
Under Ind AS 103 (Business Combinations), PPA is mandatory for accounting and financial reporting purposes (except for group consolidations). It requires that all identifiable assets and liabilities acquired be reported at their Fair Value in the acquirer’s financial statements.
The process of PPA involves multiple steps, involving:
First and foremost, identification of all tangible and intangible assets acquired through the deal
Re-evaluation of these assets and liabilities at fair value
Valuation of assets and liabilities that are contingent upon the business decisions and may get triggered during the acquisition process
Allocation of the residual value (difference between purchase price and net fair value of assets and liabilities) to Goodwill
Intangible assets are distinguished and classified based on their unique characteristics. Common categories include:
Marketing-related: Brands, trademarks, trade names, internet domain names, non-compete agreements
Customer-related: Customer lists, order backlogs, customer contracts
Artistic-related: Plays, books, films, music, and other creative works
Contract-related: Licensing and royalty agreements, service or supply contracts, leases, permits, broadcast rights, employment contracts, natural resource rights
Technology-based: Patents, software, unpatented technology, databases
Performing PPA requires:
In-depth understanding of the company being acquired
Knowledge of the regulatory guidelines applicable and proficiency in applying appropriate valuation methodologies
Skill for integrating separate valuations performed for varying assets and liabilities
Deep industry network for getting inputs for complex assets and liabilities
At CompaniesNext, we combine in-house expertise in valuing financial and intangible assets with trusted partnerships for tangible asset valuation. This allows us to deliver seamless, one-stop valuation solutions for your PPA needs.
📩 Looking for reliable Purchase Price Allocation services? Contact CompaniesNext to ensure your PPA is accurate, compliant, and supports your financial reporting goals.
What is Purchase Price Allocation (PPA)?
PPA is the process of assigning the purchase price paid in an acquisition to the acquired assets and liabilities.
Why is PPA important?
It ensures compliance with accounting standards and provides transparency in financial reporting.
Which assets are typically valued in PPA?
Tangible assets like property and equipment, and intangible assets such as trademarks and customer relationships.
How is goodwill calculated in PPA?
Goodwill is the excess of purchase price over the fair value of net identifiable assets acquired.
What accounting standards govern PPA?
IFRS 3, Ind AS 103, and US GAAP.
How long does the PPA process usually take?
Typically 4 to 6 weeks, depending on the acquisition complexity.
Do you assist with tax implications of PPA?
Yes, we provide insights to optimize tax treatment of allocated assets.
Can you help with contingent liabilities valuation?
Absolutely, we identify and assess contingent liabilities during the allocation.
Is confidentiality maintained throughout the process?
Yes, we follow strict protocols to protect client data.
Are your PPA reports accepted by auditors and regulators?
Yes, our reports meet all relevant accounting and regulatory requirements.