ASC 805 was enacted in the wake of massive balance sheet fraud
We’re here to empower investors with better financial information
WHAT YOU AND YOUR ADVISORS NEED TO KNOW
Formerly FASB 141
ASC 805 requires an evaluation of all business combinations, including a fair market value estimate of acquired intangible assets. Intangible Assets are often a significant portion of assets acquired in transactions.
For ASC 805, intangible assets are categorized into 2 groups: those with finite useful life and those with an indefinite useful life. For those with finite lives, portions of a purchase price can be allocated and amortized over the life.
Goals Of PPA
The goal of a Purchase Price Allocation ASC 805 valuation is to make financial statements and their representation of intangible assets as useful as possible for analysts, investors, and acquirers of the company.
The size of intangible assets relative to the overall balance sheet can be significant. The best practice is to engage a qualified, independent appraisal firm for the initial ASC 805 valuation and for subsequent testing.
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