Purchase Price Allocation · ASC 805

Purchase Price Allocation Services for US Acquisitions

Audit-ready purchase price allocation for US acquirers. We cover ASC 805 fair value for your books and IRC 1060 allocation for your tax return, delivered by a CVA-led team.

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Purchase price allocation valuation report for M&A business combination under ASC 805

ASC 805 Compliance

Why Purchase Price Allocation Matters After an Acquisition ?

Every business combination in the United States triggers a purchase price allocation requirement under ASC 805. The acquiring company must allocate total purchase consideration to identifiable assets acquired and liabilities assumed, each measured at fair value as of the acquisition date. Any excess over net fair value is recorded as goodwill.

This is not a formality. The allocation directly shapes your post-acquisition financial statements in ways that affect reported earnings, tax positions, and future compliance obligations for years after the deal closes.

  • Intangible assets identified during the allocation, such as customer relationships, trade names, and developed technology, are amortized over their useful lives, directly reducing reported earnings.
  • Overvalued intangibles lead to inflated amortization charges that depress future earnings. Undervalued intangibles shift too much into goodwill, increasing impairment risk.
  • External auditors, their valuation specialists, and for public companies, the SEC and PCAOB, routinely scrutinize PPA assumptions and conclusions.
  • Restatements arising from PPA errors are costly, time-consuming, and damaging to investor confidence.
  • Engaging an independent valuation specialist early ensures the allocation is defensible, well-documented, and aligned with ASC 820 fair value measurement principles.
Scope of Work

What a Purchase Price Allocation Involves ?

A purchase price allocation is a comprehensive valuation exercise that identifies and measures every asset acquired and every liability assumed in a business combination. The scope covers four key areas.

Tangible Assets and Liabilities

Property, plant, equipment, inventory, receivables, and working capital items measured at fair value as of the acquisition date. Liabilities assumed, including debt, deferred revenue, and contingent liabilities, are similarly measured.

Intangible Asset Identification

The most complex part of most PPAs. Assets recognized separately from goodwill if they meet the contractual-legal or separability criterion: customer relationships, trade names, technology, patents, IPR&D, non-competes, and order backlog.

Goodwill

The residual amount by which total consideration exceeds the net fair value of all identifiable assets and liabilities. Not amortized, but subject to annual impairment testing under ASC 350. A well-supported PPA minimizes unexpected impairment charges.

Consideration Components

Total purchase consideration measured at fair value: cash, stock, earnouts, contingent consideration, and deferred payments. Contingent consideration may require option-pricing or Monte Carlo simulation techniques.

When You Need a PPA Valuation?

Purchase price allocation is required whenever a US GAAP-reporting entity completes a business combination. These are the most common triggers.

SEC and PCAOB Compliance

Public companies face additional scrutiny from SEC reviewers and PCAOB inspectors who routinely challenge PPA assumptions.

Mergers and Consolidations

Stock-for-stock mergers, step acquisitions, consolidations, and transactions where the accounting acquirer must be identified.

M&A Transactions

Any business combination where one entity obtains control over another, whether structured as an asset deal, stock purchase, or merger.

Measurement Period Adjustments

ASC 805 allows up to one year to finalize a PPA. Provisional allocations require review and adjustment within 12 months of close.

Private Equity Acquisitions

PE firms and portfolio companies that need PPA for fund reporting, LP communication, and GAAP-compliant financial statements.

Start Your PPA

Ready to Get Your Allocation Right?

Every week of delay after closing compresses your measurement period. Engage early, avoid last-minute audit pressure, and close your books with confidence.

Most engagements begin within one week of signing.

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4–8 Weeks

Typical turnaround from data receipt to draft report

NACVA CVA

Credentialed analysts with ASC 805 specialization

100%

Audit acceptance rate on delivered PPA reports

Valuation Framework

Our PPA Methodology

We apply the valuation approaches prescribed by ASC 820 and the AICPA Accounting and Valuation Guide for Business Combinations. The specific method applied depends on the nature of each asset, data availability, and the level of measurement hierarchy that produces the most reliable result.

Income Approach

Multi-Period Excess Earnings Method (MPEEM) for customer relationships. Relief-from-Royalty for trade names, technology, and patents. Discounted cash flow models with asset-specific discount rates.

Market Approach

Guideline public company multiples and transaction multiples from comparable M&A deals. Applied where reliable market data is available and the asset characteristics are comparable.

Cost Approach

Replacement cost or reproduction cost for assembled workforce, internal-use software, and property or equipment. Adjusted for functional and economic obsolescence.

With-or-Without Method

For non-compete agreements and other restrictive covenants. Values the asset by comparing projected enterprise value with and without the asset in place, using scenario analysis.

Discount Rates & Key Adjustments

Every asset-specific valuation uses a discount rate calibrated to the risk profile of that asset. We start with the Weighted Average Cost of Capital (WACC) and adjust upward for higher-risk intangibles such as customer relationships and IPR&D, or downward for lower-risk assets like trade names and backlog.

Where applicable, we apply Discount for Lack of Marketability (DLOM) and, within the MPEEM framework, deduct Contributory Asset Charges (CACs) to isolate the cash flows attributable solely to the subject intangible asset.

Why businesses choose Equirium Analytics for valuation

Why choose Equirium Analytics ?

CVA-Led Valuation Practice.
Equirium's US valuation engagements are led by a NACVA Certified Valuation Analyst (CVA). The CVA credential is a recognized standard for business valuation professionals in the United States, ensuring that every PPA report meets the technical and ethical requirements of NACVA professional standards.

Audit-Defense Support.
A PPA report is only as strong as its ability to withstand scrutiny. Equirium proactively engages with your external auditors and their valuation specialists throughout the process. We prepare detailed documentation of assumptions, data sources, and methodology choices so that audit responses are efficient and well-supported. For public companies, we support management through SEC and PCAOB review processes.

Independence and Confidentiality.
We work NDA-first; Equirium operates as an independent valuation firm with no advisory conflicts. Every engagement begins with a non-disclosure agreement (NDA) and strict data-protection protocols. Independence is essential to the credibility of a PPA report, and we maintain it without exception.

Integrated Transaction Valuation Capabilities.
Purchase price allocation is one component of a broader transaction valuation practice. Equirium also delivers pre-acquisition pricing analysis, fairness opinions, 409A valuations, and ongoing ASC 718 (stock compensation) and ASC 350 (goodwill impairment) support. This integrated capability means your PPA is informed by a deep understanding of deal economics, not just accounting requirements.

Our Process: From PPA Engagement to Final Report

01

Engagement & Scoping

Define asset scope, timeline, reporting deadlines, and deliverable format.

02

Data Collection & Review

Gather deal documents, financials, projections, contracts, and customer data.

03

Fair Value Analysis

Apply income, market, and cost approaches to each identified asset and liability.

04

Draft Report
& Review

Deliver draft allocation
with supporting
schedules for management review.

05

Audit Defence & Support

Respond to auditor questions, defend assumptions, provide workpapers.

06

Final
Deliverable

Issue the final
ASC 805-compliant report with all supporting documentation.

Frequently Asked Questions

1What is the difference between a PPA and a business valuation?
A business valuation determines the total value of an enterprise or an equity interest. A purchase price allocation takes the total consideration paid in a business combination and distributes it across individual assets and liabilities at fair value. PPA is a financial reporting exercise required under ASC 805, not a standalone business valuation.
2How long does a PPA take?
Most PPAs take between four to eight weeks from data receipt to draft report, depending on the complexity of the transaction, the number and type of intangible assets involved, and data availability. ASC 805 allows a measurement period of up to one year from the acquisition date to finalize the allocation.
3Do we need a PPA for a small acquisition?
Yes. ASC 805 applies to all business combinations regardless of size. Even small acquisitions require identification and fair value measurement of acquired assets and assumed liabilities. The scope and complexity of the analysis may be simpler for smaller transactions, but the requirement itself does not have a size threshold.
4Can we do our own PPA internally?
While there is no regulatory prohibition against performing a PPA internally, external auditors and their valuation specialists will scrutinize the assumptions, methods, and conclusions closely. An independent, third-party valuation from a credentialed firm significantly reduces audit friction, strengthens defensibility, and demonstrates good governance.
5What happens if the PPA is challenged by auditors?
If auditors or their valuation specialists challenge a PPA, the company may need to revise assumptions, provide additional documentation, or in some cases restate financial statements. A well-documented, independently prepared PPA with clearly articulated assumptions and methodology significantly reduces this risk.

Get In Touch for Audit-Ready PPA Reports for Your Next Acquisition

Whether you are closing a single acquisition or managing a portfolio of transactions, our team delivers ASC 805-compliant purchase price allocations that stand up to auditor scrutiny and regulatory review.

NACVA-credentialed analysts. Defensible methodologies. Reports that your auditors accept the first time.

Typical turnaround: 2 to 3 weeks from data receipt.