Purchase Price Allocation Calculator

Inputs

• Purchase price (consideration transferred)
• Fair value of tangible assets
• Identified intangibles (brand, customer lists, technology)
• Assumed liabilities
• Tax rate for the deferred tax liability

How to use this calculator

1. Enter the total consideration transferred: cash plus stock plus the fair value of any assumed obligations that count as consideration.
2. Enter the fair value of tangible assets and the value of intangibles you can specifically identify: brand, customer relationships, developed technology, order backlog.
3. Enter the liabilities you are assuming and the tax rate to apply to the intangible step-up.
4. Read down to net identifiable assets, then to goodwill, the residual you could not attach to anything nameable.
5. Watch the goodwill share. A high number is not automatically wrong, but it means most of the price is riding on an asset that never amortises and gets tested for impairment every year.
6. If goodwill comes out negative you have a bargain purchase. Before booking the gain, go back and check that no liability was missed and no asset was valued too high. That is almost always the real explanation.

What each term means

Purchase price allocation (PPA)

Spreading the price paid across the identifiable assets and liabilities acquired, at fair value, with the leftover going to goodwill.

Fair value

What an asset would fetch in an orderly transaction between market participants, not book value and not what you paid for it years ago.

Identified intangibles

Non-physical assets you can name and value separately: customer lists, brands, patents, technology, non-competes. These amortise through the income statement.

Deferred tax liability (DTL)

Tax you will owe later because the book value of the intangibles now exceeds their tax basis. It reduces net identifiable assets and therefore increases goodwill.

Net identifiable assets

Everything acquired that can be named, at fair value, less assumed liabilities and the deferred tax.

Goodwill

The residual: reputation, assembled workforce, expected synergies, and whatever you overpaid. It is not amortised; it is tested for impairment.

Bargain purchase

Price below net identifiable assets. The difference is a gain recognised in income, but the standards require you to reassess all the fair values first.

Impairment

Writing goodwill down when the acquired business stops supporting its carrying value. It is a non-cash charge, but it is a public admission the deal underperformed.

More Accounting tools

• Three-Statement Tie-Out Checker
• Financial Document Builder