Valuations for Purchase Price Allocations and Goodwill Impairment
Empire has extensive experience preparing purchase price allocations for transactions across a wide range of industries throughout the U.S., Europe, APAC and the Middle East. In recent years, we have teamed with various partners in the machinery & equipment and real estate fields to provide a single, coordinated source for asset allocation and goodwill impairment testing services at an affordable cost. Empire, in conjunction with its partners, offers full capabilities for regional, national and international asset allocation services, when an independent opinion of value is needed.
According to ASC Topic 805 (formerly SFAS 141 and 141R), asset allocation is the process of assigning fair values to all identifiable tangible and intangible (including goodwill) assets, either following a merger or acquisition (for the restated or opening balance sheet) or in the process of impairment testing. Included in these assets can be tangible (machinery and equipment, real property, and others) and intangible assets (customers, technology, trade names, intellectual property, goodwill, and other intangibles).
Under ASC Topic 805 the fair value of the business interest (or assets) acquired is determined, and the fair value of the consideration paid in the acquisition is allocated to the identifiable tangible and intangible (including goodwill) assets acquired. In some cases the valuation of contingent consideration is required as part of this analysis. Empire has the robust models and experience needed to value contingent consideration and has the taught the subject for the American Society of Appraisers (“ASA”).
Under ASC Topic 350 (formerly SFAS 142) goodwill and indefinite lived intangible assets must be periodically tested for impairment using a two-step process to test and measure impairment of goodwill. The testing must be conducted at the reporting unit level (the lowest level of the entity). Step one involves identifying potential impairment by comparing the fair value of a reporting unit to its carrying value (book value). There is no impairment if the fair value of the reporting unit is greater than its carrying value. The second step involves determining the amount of impairment. In step two the fair value of the reporting unit is allocated to the reporting unit’s identifiable tangible and intangible (including goodwill) assets. Step two is similar to the accounting prescribed under ASC Topic 805.
Assigning fair values to the tangible and intangible assets and liabilities of a business enterprise requires the skills of qualified valuation professionals. Empire, in conjunction with its partners, offers a complete one-stop package. Each of our partners is an expert in their field and can produce credible and defensible analyses, in a timely manner, at an efficient cost.
Empire has performed this work for all of the large public accounting firms, and numerous regional accounting firms, as well as directly for our corporate clients. The principals of our team have performed over 500 business combination engagements over the past decade, valuing both domestic and international assets. Our valuations are performed by senior accredited valuation experts holding one or more of the following professional credentials: CFA, ASA, ABV, CPA and MBA.
Our valuations have withstood scrutiny by auditors from the Big Four accounting firms and by the SEC. We have taught classes on purchase price allocation for the ASA, chaired national fair value conferences, and spoken on fair value topics at numerous different conferences. We have an excellent reputation with the SEC and FASB and provide truly independent, third party valuation opinions.