Principle

The purchase price allocation or PPA corresponds to the difference between a company’s assets’ acquisition price and its net book value. It takes place when the purchased company joins its parent company’s consolidation process for the first time.

Accountancy norms require this variance to be allocated to the acquired company’s identifiable assets and liabilities whether they appear in the balance sheet or not. Generally speaking, the allocation concerns intangible assets (right to a lease, brand, patents or clients’ files), tangible assets (buildings, plots of land) and financial assets. The remaining unallocated variance is the goodwill.

The PPA requests an in-depth knowledge in all types of assets and liabilities valuation.

A thorough knowledge in accountancy norms is required (US and French norms as well as IFRS norms), as norms differ according to the nature of the assets to valuate distinctively from the goodwill, in the way they are valued on their amortisation condition as well as the value’s monitoring method.

Applicability

 Assistance to first consolidation variance,
 Follow up of assets value (impairment tests)

Methodology

The methods we have developed to achieve our assignments on first consolidation purchase price allocation take into account three complementary dimensions :

• Knowledge of all accountancy norms and regulations as well as all supplementary texts.
• In-depth analysis of the PPA components as well as their individual contribution to the value of the company,
• Respect of the financial evaluation principles (calculation methods, selection of the appropriate financial parameters…)

Our area of expertise encompasses the valuation of all types of assets and liabilities in all sectors of activity. We sometimes recommend the use of an external partner to complete our analysis work such as real estate experts to evaluate commercial lease, land or buildings or technical experts to valuate patents’ portfolios…)

Results

 Documented report on the PPA specifying the bodies from which the valuation has to be done, the type of assets to be valued, the choice of methods, and the calculation results.
 Documented report on the follow up of values appearing on the statement (impairment tests)
 Counselling in talks with PPA and impairment tests’ auditors

We helped them :

 Orangina...