Purchase Price Allocation

Accounting Standards Codification (“ASC”) Topic 805 and International Financial Reporting Standards (“IFRS”) 3 establish the accounting standards for determining and reporting the assets and liabilities acquired in a business combination for financial reporting purposes. Internal Revenue Code 197, 167, 338, 1060 and others describe the recording and accounting for intangible and tangible assets acquired in a transaction. The financial and tax reporting guidance requires an acquirer to recognize the assets, the liabilities, and other items such as non-controlling interest acquired to be measured at the appropriate standard of value (fair value for financial reporting and fair market value for tax reporting) as of the date of the acquisition. ASC 805 Subtopic 20-55 outlines guidance as to what constitutes an identifiable intangible asset and presents the typical areas of marketing-related, customer-related, artistic-related, contract-based, and technology-based intangibles. The Subtopic also outlines what items are not identifiable. In addition, financial reporting standards (ASC 805 and IFRS 3) also require the purchase price be allocated to reporting units (or cash generating units under IFRS) if appropriate, and that the value of the reporting unit be allocated to the acquired identifiable intangible and tangible assets and liabilities.

Oracle Capital assists management in determining what identifiable intangible assets could be recognized in a transaction and determines the fair value of those assets (and any liabilities – e.g. deferred revenue, etc.) for financial and tax reporting purposes. These services also assist in the development of the estimates of the life of an intangible asset for amortization purposes under financial reporting.

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