In M&A transactions, Purchase Price Allocation (PPA) is far more than a technical consolidation entry – it is the central interface between business valuation, accounting and tax. Blog post in German language.

A recent blog post by Michael Lembäcker (Grant Thornton Austria) looks at what matters most when it comes to purchase price allocation.

At the heart of the exercise is the systematic allocation of the purchase price to assets and liabilities. This reveals clear differences between accounting standards: while IFRS 3 requires a full revaluation to fair value ("full revaluation") and only writes down goodwill via an impairment test, the UGB (Austrian Commercial Code) limits the recognition of hidden reserves and requires goodwill to be amortised systematically over its useful life.

A further focus is on the valuation of intangible assets – ranging from brands and customer relationships to technology and contracts – as well as on tax aspects such as deferred tax and the Tax Amortisation Benefit. Goodwill, as a residual figure, can also be sanity-checked by comparing the IRR with the WACC.

The key message: early coordination between valuation, accounting and tax experts during the pre-deal phase helps to realistically assess future balance sheet structures and avoid impairment pitfalls further down the line.

Link: Purchase Price Allocation: Schnittstelle Bewertung, Rechnungslegung & Steuern – Grant Thornton Austria