When business combinations, more commonly known as PPA (Price Purchase Allocations) according to IFRS, take place, it generates the need to develop research work on the distribution of the price paid. It is therefore a consultancy service linked to an already negotiated and concerted deal which has to be reflected in the accounting of the companies involved.

It consists of the following stages:

  1. Description of the transaction.
  2. Identifying the cash-generating units with the intention of segregating those groups of independent assets from other groups’ cash flows also collected in the combination.
  3. Identifying all of the intangible assets that are grouped together in generally accepted categories: marketing related (trademarks, brand names, domains); customer related (order books, contracts, lists of customers); contractual links related (transfer rights, Rights in Rem regarding real estate, licences, franchise agreements…); art related (author rights, artistic works, copyright…); or technology related (patents, own designs, computer programmes, data bases, processes…)
  4. Identifying the liabilities and contingent liabilities in line with the investigation’s results carried out and taking into account IAS 37 regarding payroll accrual entries and contingent assets and liabilities.
  5. Valuation of all previously identified assets and liabilities (under fair value standards and always bearing in mind the possibility of a reliable measurement)
  6. The completion of an impact analysis, determining goodwill as the difference between the price paid and the fair value of the assets incorporated in the combination and, where appropriate, the determination of the excess over the acquisition price.
  7. Reconsideration of the excess cost, if there is any, by virtue of what is explained in paragraph 56 in IFRS 3

It is therefore a process that combines consultancy, valuation and advisory, seeking support for both the participants (operation agents) as well as their auditors.

AIMED AT

  • Buyer
  • Seller
  • Auditors
  • Business Consultants
  • Chief Financial Officers

Need more information?

RELATED SERVICES