Purchase Price Allocation

We next allocate the purchase price calculated in the previous step to the acquired net assets. The residual is allocated to goodwill.

 

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Note that under the new acquisition accounting rules (e.g. FAS 141r), we do not include the transaction, or advisory, fees or restructuring charges in the purchase price. Had we used the old purchase accounting rules, we would need to add $30 million (in our example) to the “Adjusted Purchase Price”. Additionally, we would have set up a deferred tax asset (“DTA”) for any restructuring charges equal to the restructuring charge multiplied by the tax rate, and included the DTA in the goodwill calculation.

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Purchase Price Allocation

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