Purchase price allocation – identification and valuation of acquired assets
What is purchase price allocation?
Purchase Price Allocation (PPA) is a mandatory process of allocating the price paid in an acquisition transaction to identifiable assets, liabilities and goodwill.
The purpose of PPA is to correctly recognise the effects of the transaction in the acquirer’s financial statements – in accordance with International Financial Reporting Standards (IFRS 3) or the Polish Accounting Act. This process applies to both company acquisitions and contributions in kind of organised parts of an enterprise (ZCP) or intangible assets.
When should purchase price allocation be carried out?
Purchase price allocation is necessary:
- following the acquisition of a company, business operations or a ZCP,
- when making a contribution in kind to a company,
- in the consolidation of financial statements,
- following an asset acquisition requiring accounting in accordance with IFRS 3,
- when disclosing goodwill or badwill in the balance sheet,
- during the implementation of IFRS by corporate groups.
Who is purchase price allocation (PPA) intended for?
Purchase price allocation applies, among other things, to:
- corporate groups reporting under IFRS/IAS,
- companies acquiring other entities or organised parts thereof,
- companies receiving intangible contributions, such as brands or technologies,
- entities preparing for the audit or consolidation of financial statements,
- private investors and funds carrying out capital transactions.
What does the purchase price allocation process involve?
As part of the PPA:
- we analyse the transaction structure and its impact on financial reporting,
- we identify separately identifiable assets and liabilities,
- we value asset components in accordance with the fair value principle,
- we determine goodwill or negative goodwill,
- we prepare a PPA report compliant with the requirements of IFRS 3 or the Polish Accounting Act,
- we support the client in their dealings with the auditor and the finance team.
Why should you entrust us with purchase price allocation (PPA)?
We specialise in professional purchase price allocation (PPA), supporting companies in M&A transactions, financial reporting and consolidation in accordance with IFRS 3 and the Polish Accounting Act. Our comprehensive approach ensures reliable reports acceptable to auditors, investors and regulatory authorities.
- Experience in PPA projects – we carry out allocations for companies across various industries and for different types of transactions, both domestic and international
- Expert knowledge of standards and regulations – IFRS 3, the Polish Accounting Act and the principles of asset and liability valuation
- Comprehensive approach to transactions – covering transaction analysis, identification of value components, their valuation and full documentation
- Cooperation with the client’s auditors and advisers – we ensure full consistency with audit and corporate processes
- Documentation ready for consolidation, audit and publication – reports fully compliant with financial reporting requirements
Thanks to our experience, purchase price allocation becomes a reliable tool supporting M&A processes, consolidation and the preparation of financial statements.
Benefits of purchase price allocation
- compliance with applicable accounting standards (IFRS 3, the Polish Accounting Act),
- correct accounting treatment of the acquisition transaction in the financial statements,
- reliable recognition of goodwill and intangible assets,
- professional documentation for audit and consolidation purposes,
- increased credibility with investors, banks and stakeholders.
Our experience
We have carried out dozens of purchase price allocation projects, including for:
- companies acquiring technology startups with intellectual property (SaaS, e-commerce, medtech),
- capital groups implementing IFRS 3 in their reporting,
- companies making contributions in kind of brands, technologies and know-how,
- clients from the service, industrial and education sectors,
- institutional investors and PE/VC funds.
All reports were prepared in accordance with statutory auditors’ requirements and in cooperation with clients’ accounting and audit teams.
FAQ
What is purchase price allocation?
It is the process of allocating the purchase price to identified assets, liabilities and goodwill in accordance with IFRS 3 or the Polish Accounting Act.
Is PPA mandatory?
Yes – for entities applying IFRS or consolidating financial statements, purchase price allocation is required.
Do intangible assets need to be valued?
Yes – in accordance with IFRS 3, assets such as trademarks, customer relationships, technology, know-how and other intangible assets should be identified and valued.
How long does it take to prepare a PPA?
Depending on the complexity, it usually takes between 2 and 6 weeks. The timeframe is affected by data availability and the number of identified components.
Is the PPA report sufficient for the auditor?
Yes – we provide full documentation containing a description of the methods, assumptions and calculations, prepared with statutory auditors’ and regulatory requirements in mind.
How is Purchase Price Allocation determined?
Purchase price allocation is determined by allocating the price paid for an acquisition to the individual assets and liabilities of the acquired entity. First, the fair value of identifiable assets and liabilities is determined, including intangible assets such as brands, technology and customer bases. The difference between the purchase price and the net value of these assets constitutes goodwill or negative goodwill.
The total amount allocated under the PPA must equal the total price paid in the transaction.
Do you need professional purchase price allocation (PPA)?
Contact us – we will carry out comprehensive purchase price allocation in accordance with IFRS 3 and the Polish Accounting Act. We provide:
- identification and valuation of assets,
- determination of goodwill,
- full documentation for audit and consolidation.