Lesson 8 of 8 · All lessons in this module
- Intangible assets: definition, purchase and business combinations
- Internally developed intangibles and capitalising versus expensingVideo lesson
- Impairment of PPE and intangiblesVideo lesson
- Assets held for sale and impairment reversals
- Derecognition: sale, abandonment, exchange and spin-offVideo lesson
- Disclosures for PPE and intangible assets
- Fixed asset turnover, asset age and reinvestmentVideo lesson
- Integrated cases: a purchase price allocation and the PPE note
Lesson 8 of 8 · 17 min
Integrated cases: a purchase price allocation and the PPE note
Two exhibits drive most long-term asset questions: the purchase price allocation, which turns a takeover price into identifiable assets, a deferred tax liability and goodwill, and the PPE note, whose roll-forward lets you find disposals, gains, ages and turnover.
In short
- Goodwill = consideration + non-controlling interest − net identifiable assets at fair value. The formula without the NCI works only for a 100% purchase.
- Net identifiable assets are after the deferred tax liability the buyer must record on the fair-value uplift of intangibles; that liability is part of why goodwill is large.
- Only finite-life intangibles are amortised; indefinite-life brands and goodwill are tested annually. IFRS tests against recoverable amount, US GAAP against fair value.
- In a PPE roll-forward, carrying amount of disposals = cost disposed − accumulated depreciation on those disposals; gain = proceeds − that figure.
- Age ratios exclude land. Impairment losses often sit in the accumulated depreciation column and stretch the age estimate.
Unlock this lesson free for 7 days
Create a free account to get 7 days free: every lesson, video and flashcard, and the question bank. No card needed.