What is purchase price allocation?
Purchase price allocation is the process of assigning the total cost of acquiring a business to its individual assets and liabilities.
Why is PPA important?
It ensures that financial statements reflect the fair value of acquired assets and liabilities. It also determines goodwill, which impacts future reporting.
What does PPA involve?
It involves valuing tangible assets, intangible assets, and liabilities. Any remaining value after allocation is recorded as goodwill.
When is PPA required?
It is required during mergers and acquisitions when one company acquires another.
Who performs purchase price allocation?
Accountants and valuation specialists perform PPA to ensure compliance with accounting standards.