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Purchase Price Allocation (ASC 805)

Under ASC 805, companies must identify and value any assets and liabilities acquired in a business combination as well as any contingent consideration (earn-out) that is a component of the purchase price. Valuation calculations prior to an acquisition can also assist in decision-making on terms and understanding the impact on financial statements.

Delphi specializes in the valuation of intangible assets and can work closely with real estate appraisers and equipment appraisers to coordinate the process for large or complex transactions. We routinely value complicated contingent consideration agreements and apply advanced valuation techniques including option pricing methods.

Intangible assets fall under five categories per ASC 805 and include the following examples:

  • marketing-related:
    • trademarks, trade names, service marks, trade dress (unique color, shape, or package design)
    • internet domain names
    • non-compete agreements
  • customer-related:
    • customer relationships
    • order or production backlog
    • customer contracts
  • artistic-related:
    • literary works
    • musical works
    • pictures and photography
    • video material
  • contract-based:
    • licensing, royalty, and standstill agreements
    • advertising, construction, management, service or supply contracts
    • lease agreements
    • franchise agreements
    • servicing contracts
    • employment contracts
  • technology-based:
    • patented and unpatented (i.e., existing) technology
    • computer software and mask works
    • databases (including title plants)
    • trade secrets (such as secret formulas, processes, and recipes)
    • in-process research and development (“IPR&D”)