2021 was a banner year for M&A. But for CFOs, the New Year’s hangover comes in the form of purchase accounting for all of those deals. If January has you dreading the arrival of audit season, Adamy can help. According to ASC 805, after a deal, the acquirer must recognize and value the identifiable assets acquired. This includes fixed assets, goodwill, and other intangible assets such as trade names, technology, and customer relationships. This initial valuation, often referred to as the purchase price allocation, is used to prepare the opening balance sheet.
This is where we come in. Our role is two-fold:
- Provide you with a well-documented valuation, and
- Collaborate with the auditors for a smooth process. You could say that we are technical experts with a project management mindset.
Here are some tips for incorporating a purchase price allocation into a smooth audit process:
- Begin by scoping the acquired assets as soon as possible. Consider fixed assets, like inventory, intangible assets, and even market lease agreements.
- Determine which assets require a valuation from a third-party specialist. (Experienced acquirers may be comfortable doing this on their own. Others may prefer to consult with a valuation specialist on scoping.)
- Review this list with your auditors early to ensure this aligns with their expectations. No one wants to find out part-way through an audit that more work is required, and additional costs will be incurred because an out-of-scope asset was deemed material.
We work in coordination with our clients and their auditors throughout the process of preparing, supporting, and finalizing the opening balance sheet. This feedback loop is key to a timely deliverable.
You can count on us to see the valuation smoothly through the audit process and help you avoid surprises. How’s that for a cure to the New Year‘s M&A hangover?
Written in collaboration with Liz Briggson, a Referral Partner of Adamy Valuation.
