Purchase price allocations and goodwill impairment testing

Purchase price allocations (PPA)

Following a business combination where an entity acquires a controlling interest in another entity, the acquirer is required, for financial reporting purposes, to perform a PPA and allocate the purchase price to any identifiable assets and liabilities assumed.

PSG Capital has, through its involvement in numerous successful M&A buy-side transactions, as well as general valuation services, conducted many purchase price allocations, which includes the process of:

Goodwill impairment testing

International Financial Reporting Standards (IFRS) stipulate that an asset cannot be carried at an amount that exceeds its recoverable amount. In order to confirm this and ensure that assets are correctly accounted for in the financial statements, impairment tests are required to be performed. For goodwill and other indefinite useful life intangibles and similar assets, this is required to be performed annually, and for all other assets outlined under IAS 36, only when there is an indication of impairment.

PSG Capital has extensive knowledge of the IFRS requirements for performing goodwill impairment tests, including the various valuation methodologies required to perform such tests, and can assist management to correctly account for the carrying amount of assets in financial statements.