When allocating a purchase price between intangibles/goodwill, do you write up your intangibles based on the purchase price, or the excess purchase price (PP - net tangible assets)?
I've seen examples of both and I'm not sure what is the correct method.. allocating based on your excess purchase price makes sense to me logically, but can someone confirm the correct method?
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http://macabacus.com/accounting/purchase-price-allocation1
not in banking, therefore this may or may not be relevant to what you're asking. we discuss with management the round-about estimate of the tangible values, then our valuation of the intangibles is based on the remainder, so therefore, the excess purchase price. if i'm understanding the first part of your question correctly, it seems as though you would be double counting some value somewhere if you allocate the purchase price to ONLY the intangibles (and assuming there were some tangibles in the deal). we then find fair value of the intangibles, and whatever is the residual is the goodwill or bargain purchase amount. again, not sure how much help this may be, but i noticed no one else was commenting.
not in banking, therefore this may or may not be relevant to what you're asking. we discuss with management the round-about estimate of the tangible values, then our valuation of the intangibles is based on the remainder, so therefore, the excess purchase price. if i'm understanding the first part of your question correctly, it seems as though you would be double counting some value somewhere if you allocate the purchase price to ONLY the intangibles (and assuming there were some tangibles in the deal). we then find fair value of the intangibles, and whatever is the residual is the goodwill or bargain purchase amount. again, not sure how much help this may be, but i noticed no one else was commenting.
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