Purchase price allocation (“PPA”) is an exercise where the acquirer allocates the purchase price paid to the acquired assets and liabilities of the target company. PPA is usually carried out for accounting and financial reporting under Ind AS 103 which requires all business combinations (except group consolidation) to report the Fair Value of assets (tangible and intangible assets) and liabilities acquired in their financial statements. PPA is also required for allocation of consideration paid in a ‘Slump sale’/ ‘Slump exchange’ transaction. PPA process allocates the purchase consideration paid for acquisition of an entity / business to the Fair Value of tangible and intangible assets acquired and liabilities assumed. Intangibles need to be separable and identified based on their unique characteristics. The difference between the purchase consideration and the fair value of the tangible and intangible assets [including Valuation of contingent assets and liabilities, non-controlling interests, contract liabilities (deferred revenue) etc.] is allocated to goodwill.
PPA is a complex process and involve identification, measurement and valuation of intangible assets. It requires an in-depth knowledge of the acquired business and its key value drives as well as knowledge and experience in the application of various valuation approach and methodologies.
Transique Valuation Advisors has a strong in-house capabilities for valuation of Financial and Intangible assets and for Property, Plant and Equipment, we have alliances with other leading firms in order to provide clients seamless and one point valuation services.
There are five major types of intangible assets and valuation methodologies vary for each of these assets. The remaining amount which cannot be apportioned to the respective Tangible and Intangible Assets forms part of Goodwill.