Benefit Valuation Adjustment The so-called tax amortization benefit (TAB) adjustment represents the present value of the federal income tax savings resulting from the tax amortization of an acquired intangible asset over a statutory period. Internal Revenue Code Section 197 allows the cost of certain acquired intangible assets to be amortized for federal income tax purposes. However, not all acquired intangible assets are subject to such amortization tax deductions. Analysts should apply the so-called TAB adjustment to an intangible asset valuation analysis only when it is appropriate. This discussion summarizes what analysts should know before applying the TAB adjustment to an…
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In a SPAC Merger Transaction The fair value of equity consideration issued in a merger involving a public company is generally calculated as the product of the quoted price for the individual equity instrument times the quantity issued (commonly referred to a “P times Q”). However, if the merger involves a special purpose acquisition company (SPAC), determining “P” can be subjective and may result in different interpretations of U.S. GAAP fair value between the valuation specialist and the parties involved in the deal. Introduction The fair value of equity consideration issued in a merger involving a public company is generally…
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For public companies, it is increasingly necessary to disclose a preliminary allocation of purchase price in the 10-Q or 10-K immediately following the closing date. Although M&A activity slowed in the first nine months of 2017 compared to 2016, valuation multiples have continued to rise and major stock market indices marched steadily higher. Lucas Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, explains. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Early Purchase Price Allocation Estimates Help Avoid EPS Surprises. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with…
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The Financial Accounting Standards Board’s (FASB) definition of a business is important when it comes to classifying assets and related expenses. However, some feel that the FASB’s current definition is ambiguous and can result in inconsistent designations of business or asset status. Samantha Albert, senior financial analyst with Mercer Capital, explains what is currently happening with the FASB proposed standards update. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Business or Asset: Can You Tell the Difference? This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the…
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Companies often use contingent consideration when structuring M&A transactions to bridge differing perceptions of value between a buyer and seller, to share risk related to uncertainty of future events, to create an incentive for sellers who will remain active in the business post-acquisition, and other reasons says Lucas M. Parris, a senior member of Mercer Capital’s Financial Reporting Valuation Group. In this article, he discusses the requirements of ASC 805, fair value, and the complexity of the procedures necessary to estimate future payment. [button color=”blue” link=”http://mercercapital.com/financialreportingblog/valuation-contingent-consideration/” target=”_blank” font=”arial” align=”left”]To learn more about the valuation of contingent consideration, click here.[/button] This…
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A help or hinderance? On July 1, 2013, FASB issued exposure drafts calling for public commentary on three proposals that address private company stakeholder concerns. Two proposals involve accounting for identifiable intangible assets and goodwill acquired in business combinations. In this article, Mark Zyla analyzes the proposed changes, including potential concerns, and their far-reaching impact on the industry, as well as private and (in 2014) public companies.
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The standard 10 stages to use in an intangible asset engagement In this second installment, Robert F. Reilly completes his review of the 10 typical stages of any intangible asset analysis engagement. For purposes of this article, an intangible asset analysis may include a valuation, damages analysis, transfer price study, or other economic analysis. The business appraiser will typically consider these stages, or elements, before, during, and after performing any quantitative or qualitative analyses.
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The standard 10 stages In this first half of his two-part series, Robert F. Reilly summarizes six of the ten typical stages of any intangible asset analysis assignment. For purposes of this article, an intangible asset analysis may include a valuation, damages analysis, transfer price study, or other economic analysis. The business appraiser will typically consider these stages, or elements, before, during, and after performing any quantitative or qualitative analyses.