ASC 805 IFRS 3

ASC 805 / IFRS 3 — Purchase Price Allocation

Regulatory guide for purchase price allocation (PPA) under ASC 805 (US GAAP) and IFRS 3 (IFRS).

Overview

ASC 805 and IFRS 3 require acquirers to allocate the purchase price of an acquired business to its identifiable tangible and intangible assets and liabilities at fair value. Any residual is recorded as goodwill.

PPA Waterfall

1. Determine Purchase Consideration
       ↓
2. Identify & Value Tangible Assets at Fair Value
       ↓
3. Identify Intangible Assets
       ↓
4. Select Valuation Methods per Asset
       ↓
5. Value Each Identified Intangible
       ↓
6. Calculate Assumed Liabilities
       ↓
7. Compute Goodwill = Purchase Price - FV(Net Identifiable Assets)

Implementation

from intangible_valuation.advanced.purchase_price_alloc import purchase_price_allocation
from intangible_valuation.advanced.goodwill import goodwill

# Full PPA waterfall
result = purchase_price_allocation(
    purchase_price=10_000_000,
    tangible_assets_fv=3_000_000,
    identified_intangibles=[
        {"name": "Patent Portfolio", "value": 2_500_000, "method": "RFR"},
        {"name": "Customer Relationships", "value": 1_800_000, "method": "MPEEM"},
        {"name": "Brand", "value": 1_200_000, "method": "RFR"},
    ],
    liabilities_fv=500_000,
)

# Goodwill calculation
g = goodwill(purchase_price=10_000_000, fair_value_net_identifiable_assets=8_000_000)
# Goodwill: $2,000,000

Key Requirements

• ASC 805-20-30-1: Measure identifiable assets at fair value
• ASC 805-30-30-1: Goodwill = Excess of consideration over net assets
• IFRS 3.18: Recognize identifiable intangible assets separately from goodwill
• IFRS 3.32: Measure non-controlling interest at fair value or proportionate share

Common Intangible Assets in PPA

Asset	Typical Method	Useful Life
Patents	Relief from Royalty	Remaining legal life
Trademarks	Relief from Royalty	Indefinite or fixed
Customer Relationships	MPEEM	5-15 years
Technology	RFR / Cost	3-7 years
Non-Compete	Income approach	Contract term