Purchase Price Allocation

What is Purchase Price Allocation?

Purchase price allocation (PPA) is the process of assigning the total purchase price of an acquired business to its identifiable assets and liabilities at fair value. It is a required step under ASC 805 following an acquisition, and it plays a central role in determining goodwill, supporting audit readiness and enabling accurate financial reporting.

For buyers or acquired companies, PPAs affect post transaction depreciation, amortization and tax positions. For accounting teams, it ensures regulatory compliance and transparency. A well-executed purchase price allocation supports smoother audits and eliminates costly surprises down the line.

Our Purchase Price Allocation Services:

• Determining final transaction price, including cash, earnouts or contingent consideration, rollover equity or equity interests in a third-party entity
• Allocating fair value to tangible assets (e.g., inventory, fixed assets, etc.) and liabilities (e.g., deferred revenue, warranty liabilities, etc.)
• Allocating fair value to intangible assets (e.g., software, trade names, patents, customer relationships, etc.)
• Calculating residual goodwill, including components such as assembled workforce
• Calibrating risk measures, including internal rate of return (IRR), weighted average cost of capital (WACC) and weighted average return on assets (WARA)

The Private Company Council (PCC) election is an accounting policy choice available to private companies under ASC 805. It allows acquirers to apply simplified accounting alternatives for business combinations.

Established by the Financial Accounting Standards Board’s (FASB’s) Private Company Council, this election can reduce complexity and ongoing costs associated with acquisition accounting while maintaining compliance with U.S. GAAP.

Simplifying Acquisition Accounting for Private Companies

For private company buyers, the PCC election can streamline the need to separately recognize and amortize certain intangible assets — such as customer relationships or noncompete agreements — and instead, include them in goodwill. For chief financial officers and controllers, this means reduced valuation costs, simpler financial statements and ongoing amortization expense, which may lower the likelihood of goodwill impairment in future periods.

A properly documented PCC election enhances efficiency throughout the acquisition accounting process and supports clear, consistent financial reporting over time.

Key Documentation Considerations

To implement the election, management must document key decisions and disclosures, including:

• Management’s election on whether to separately recognize certain intangible assets (e.g., customer relationships, noncompete agreements) from goodwill
• The alternative goodwill amortization approach on a straight-line basis over 10 years (or less)
• A technical memorandum outlining the election and its financial statement impact under ASC 805-10-15-4

Opening balance sheet (OBS) services provide the critical bridge between a purchase price allocation and day-one accounting for an acquired entity. Following the completion of a PPA, OBS services ensure that all acquisition-date fair value adjustments are properly recorded, classified and integrated into the buyer’s consolidated financial statements in accordance with ASC 805.

For finance teams managing post acquisition integration, OBS services streamline the technical accounting workload and reduce the risk of misstatement. For auditors, a properly prepared opening balance sheet provides clear documentation of management’s judgments and supports efficient audit execution. Professional OBS services eliminate reconciliation issues and establish a clean foundation for ongoing financial reporting.

Our Opening Balance Sheet Services:

• Preparing journal entries and opening balance sheet for the post-acquisition entity
• Drafting disclosure language for inclusion in U.S. GAAP financial statements
• Developing technical accounting memorandums that evaluate business combination criteria under ASC 805
• Treating and documenting Private Company Council elections, if applicable

Delivering Clarity, Compliance and Confidence for Your Purchase Price Allocation and Opening Balance Sheet Needs

Opening balance sheet accounting requires precise methodologies that are used in purchase price allocation with clear documentation and alignment with audit standards. Weaver’s team combines valuation insights with practical accounting knowledge to deliver accurate, defensible results.

Following a transaction or reorganization, reporting deadlines and disclosure demands often come quickly. We provide structure and clarity to your financial statements, focusing on what matters to auditors, regulators and stakeholders through key areas that add value.

• Detailed PPA analyses tailored to deal structure (including PCC elections)
• ASC 805 compliance support
• Technical accounting memos and journal entries
• Consolidated opening balance sheet preparation
• Industry-specific valuation methods for tangible and intangible assets
• Clear documentation to support internal teams, auditors and external stakeholders