Business Valuation + Due Diligence

How to Address Fair Value Issues with an Auditor During an Acquisition

After your company makes, or is in the process of making an acquisition, it is important to understand the purchase accounting. You know about fair value, and you have studied ASC 805 – Business Combinations in detail, but what’s next? Let us help answer a few questions to help save you time and cost.

Machinery and Equipment Valuations for Purchase Price Allocations

Assets typically found within the fixed asset category include machinery, equipment, and leasehold improvements. There are two choices for determining the fair value to be assigned to the fixed assets: (1) Hire a third party that specializes in the valuation of fixed assets; or (2) Provide your own estimation of fair value. Which option is best depends on a number of important factors.

How Much Financial Due Diligence is Right for Buying a Business?

If you're looking to buy or acquire a business, chances are you know about due diligence. Or at least have heard it is a good idea. But there lies the challenge - how do you know that you have done enough to feel confident that a business you are buying is a good investment or will provide you the earning potential you think it will?

Impairment Testing of Long-Lived Assets

This article discusses the testing of long-lived assets for impairment under ASC 360-10. It should be noted that there are significant differences between the tests required for indefinite lived assets under ASC 350-30, long-lived assets under ASC 360-10, and goodwill under ASC 350-20. Performing these tests in the proper order is critical to concluding the correct amounts of impairment (if any).

How to Value Inventory Under ASC 805

For purposes of ASC 805, items within inventory need to be stated at fair value. Fair value is often greater than their book value as book value only includes historical costs and ignores the required return accruing to inventory as it progress through the value creation process. The process of stepping up inventory to fair value often results in a greater amount of COGS in the first post transaction period and can drastically lower the expected profit of the business on a GAAP basis. Management should be aware of this and its possible effects on earn...

Should I Adopt the New Accounting Alternatives?

In 2014 the Private Company Council and FASB approved new accounting alternatives for goodwill and intangible assets that can be elected by most private companies. The accounting alternatives were designed to lower the complexity and cost associated with meeting the current standards.

The Six Inputs to a Black-Scholes Valuation

This article assumes use of the Black-Scholes formula (a closed-form model); as this is the method most private companies’ use.[2] We will explain where the typical inputs for each of these six factors are found and in certain cases, how they can be modified to fit the facts and circumstances of a specific situation.

Purchase Price Allocations: Can We Do This In-house?

Early in my career I was often asked to assist auditors with reviewing in-house valuations of intangible assets acquired in business combinations. I often responded to these requests with a large sigh. Having been through this process before I knew many CFOs and controllers believed they could put together an intangible valuation. After all, many CFOs … Continued

Accounting for Goodwill and Intangible Assets Just Got Easier

FASB approved new accounting alternatives for goodwill and intangible assets that can be elected by most privately held businesses. This article highlights (1) some of the changes allowed under the accounting alternatives, (2) areas in which companies may find cost savings, and (3) some of the potential issues with electing the alternatives.

Valuation is Key as the M&A Market Slowly Heats Up

After a lackluster 2012, domestic M&A activity is on the rise. Small business deal volume was up 62% in the second quarter of 2013 compared to the same period for 2012, according to Insight Report, which analyzes private business transactions in more than 70 major U.S. markets.