Intangible Asset Impairment and Valuations--
FAS 141 & 142

Purchase price allocation is the process of assigning fair values to all major assets and liabilities of an acquired enterprise following a business combination. For federal tax purposes, when assets are acquired in the purchase of a trade or business, the purchase price must be allocated to the underlying assets for purposes of determining depreciation and amortization allowance under IRC §167 and §197 of the Internal Revenue Code. The actual allocation is governed by IRC §1060(a) and Reg. §1.1060-1, which require a buyer and seller of a business to allocate the purchase price according to the rules of IRC §338(b) (5) and Reg. §338-6. Under this method, the buyer and the seller must use the residual method to allocate the purchase price.

Purchase price allocation for financial accounting purposes has recently undergone significant and complex changes. Accounting Principles Board (APB) Opinion 16 and APB 17 have been superseded by Statement of Financial Accounting Standards (SFAS) No. 141, Accounting for Business Combinations, and SFAS 142, Accounting for Goodwill and Other Intangibles. Under SFAS 141 all business combinations must now be accounted for using the purchase method, based on the values of the assets exchanged. Under SFAS 142, goodwill and indefinite-lived intangibles are no longer amortized. Additionally, goodwill and other intangibles must now be tested annually for asset impairment at the reporting unit level and on an interim basis if an adverse triggering event takes place. Corporations that are planning a business combination should consider the effect of the transaction under the new rules and plan to carry out a thorough purchase price allocation accordingly. HSSK has the experience and expertise to ably and accurately navigate the myriad tax, accounting and valuation issues encountered in a complex purchase price allocation. HSSK has been built with professionalism at its cornerstone; we consistently maintain a level of conduct and performance that is commensurate with this professionalism.

Overview of HSSK Group valuation services.