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What is Purchase Price Allocation? In acquisition accounting, purchase price allocation is a practice in which an acquirer allocates the purchase price into the assets and liabilities of the target company acquired in the transaction.
The objective of purchase price allocation (PPA) is to allocate the price paid to acquire the target company and to allocate them to the target’s purchased assets and liabilities, which must reflect their fair value.
IFRS requires that the purchase price paid (in a business combination) needs to be allocated to the assets acquired and liabilities assumed, a process that is also referred to as a ‘purchase price allocation’ or PPA.
Purchase Price Allocation (PPA) is a process in accounting in which the acquirer assigns the assets and liabilities of the company targeted. PPA is performed using three main components: net identifiable assets, goodwill, and fair value adjustments (write-up).
What is a purchase price allocation? A purchase price allocation (PPA) is an exercise intended to identify what was actually purchased—all of the assets, both tangible and intangible, as well as any liabilities—and assigning a Fair (or Fair Market) Value to these various components.
When acquiring another company, engaging an appraiser to conduct purchase price allocations (PPA) as soon as the transaction closes is crucial to avoid rushing the process when trying to complete an audit later.
Purchase price allocation (PPA) is an application of goodwill accounting whereby one company (the acquirer), when purchasing a second company (the target), allocates the purchase price into various assets and liabilities acquired from the transaction.
What is Purchase Price Allocation? PPA is, simply defined, the practice of dividing the total purchase price of a target company into various components—including tangible and intangible assets, liabilities, and equity.
Following these steps and being precise in your purchase price allocation will ensure your company is compliant with GAAP reporting rules and prevent future compliance issues after the acquisition is complete.
Purchase Price Allocation (PPA) is the process of allocating the purchase price of an acquired company to its various assets and liabilities. Goodwill, on the other hand, is an intangible asset that arises when the purchase price goes beyond the fair value of the net identifiable assets.