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.
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