Business Valuation (#61)

In this podcast episode, we discuss FASB’s statement number 141R, as well as the need for business valuation services when engaging in acquisitions. Key points made are:

  • The original Statement 141 addressed the use of fair value when recording a business acquisition.

  • The revised Statement 141R included a number of changes, including the following:

    • Changed the definition of a business.

    • Equity securities issued as part of an acquisition are valued on the closing date.

    • Includes an estimated fair value for any earnout provisions.

    • Acquisition costs are charged off separately.

    • In-process R&D is valued and carried on the balance sheet.

    • The allocation of the purchase price is about the same as before; includes fair values for tangible assets and intangible assets.

  • When deriving a valuation for acquiree assets, can use a valuation firm to develop a valuation report. This report is more defensible, since these firms have a lot of expertise. A valuation project typically takes 4-6 weeks, and costs $15,000-$30,000.

Related Courses

Accounting for Intangible Assets
Business Combinations and Consolidations
Business Valuation
Mergers and Acquisitions