Purchase Price Allocation Services (FASB ASC 805 – Business Combinations, and FASB ASC 820 – Fair Value Measurements & Disclosures (formerly SFAS 141R and SFAS 157)
FASB ASC 805 eliminates pooling-of-interests in favor of the purchase accounting method. Under FASB ASC 820, acquired goodwill must be stated at its fair value and is to be identified separately from other identifiable intangible assets, the fair value of which is recognized and stated separately. Other identifiable intangible assets include assets of a contractual nature or assets that can be separated from the goodwill of a business, such as marketing-related, customer-related, or technology-based intangible assets.
Assigning fair values to the tangible and intangible assets and liabilities of a newly acquired business enterprise requires the skills of qualified valuation professionals. Advent, in conjunction with its partners, offers a complete, one-stop service: we manage the various experts for you. Each of our partners is an expert inï¿½his/her field and can produce credible and defensible analyses in a timely manner and at an efficient cost.
Advent has performed this work for accounting firms, as well as directly for our corporate clients, valuing both domestic and international tangible and intangible assets. Our valuations are performed by senior accredited valuation experts holding one or more of the following professional credentials: ASA, ABV, CBA, and/or MAI. Our valuations have withstood scrutiny by the SEC, lending institutions, and the IRS. Our valuations are independent, third party valuation opinions.
Goodwill Impairment Testing (FASB ASC 350 – Goodwill and Other Intangible Assets(formerly FAS142)
In June, 2001, the FASB issued statements regarding the testing for booked assets continuing value over time (impairment testing). The new ruling states that goodwill and other intangible assets with non-determinable lives are non-amortizable and requires that both upon the initial adoption of the standard, and on at least an annual basis, all existing reporting units with booked intangible assets are required to perform valuation tests for possible impairment of those assets (referred to as Step 1). If those tests indicate possible impairment, then further analyses of the value of these assets are required (referred to as Step 2).
Step I compares fair value of a reporting unit with its carrying amount (or book value). If the fair value of a reporting unit is greater than its carrying amount, including recorded goodwill, then no impairment is deemed to exist. If the reporting unit’s carrying amount is greater than its fair value, then an analysis of the amount of this impairment must be conducted (Step 2).
Step II compares the measured fair value of the goodwill of the reporting unit with the carrying amount of that goodwill. SFAS states that the fair value of goodwill can be measured only as a residual and cannot be measured directly; therefore, in Step II, an analysis similar to that conducted in ASC 805 is generally performed. Essentially, in order to determine the implied fair value of the goodwill, all assets must be valued and, where appropriate, identified long-lived assets would be adjusted downward to their fair value. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, then a goodwill impairment loss must be recognized for an amount equal to that excess. The adjusted carrying amount of goodwill will be its new accounting basis.