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1. viewpoint.pwc.com › dt › us7.3 Business combinations - Viewpoint

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   7.3.2 Business enterprise valuation. Typically, the initial step in measuring the fair value of assets acquired and liabilities assumed in a business combination is to perform a BEV analysis and related internal rate of return (IRR) analysis using market participant assumptions and the consideration transferred.

   • 9.1 Overview

     Under ASC 350-20, goodwill is not amortized.Rather, an...

2. www2.deloitte.com › content › damClearly IFRS - Summary guidance and practical tips for IFRS ...

   www2.deloitte.com › content › dam

   Market – Fair value measurement under IFRS 13 assumes that a transaction to sell an asset or to transfer a liability takes place in the principal market (or the most advantageous market in the absence of the principal market). The principal market is the market with the greatest volume and level of activity for the asset or liability.

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3. credofinance.com › reference-guide-to-valuingREFERENCE GUIDE TO VALUING ASSETS IN BUSINESS COMBINATIONS

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   IRR = WACC — Indicates that the PFI is likely to reflect market participant assumptions accurately, and that the transaction consideration is likely to be representative of the fair value. IRR > WACC — Indicates whether the PFI includes some or all of the impact of entity-specific synergies, whether it reflects an optimistic bias, whether it reflects a bargain acquisition, or whether it ...

4. onlinelibrary.wiley.com › doi › absMarket participant assumptions - Accounting and Valuation ...

   onlinelibrary.wiley.com › doi › abs

   Sep 3, 2019 · Abstract. This chapter discusses how a reporting entity shall measure the fair value of an asset or a liability by using the assumptions that market participants would use in pricing the asset or liability, assuming that market participants act in their economic best interest. In developing those assumptions, a reporting entity need not ...

5. www.hopkinsandhoward.com › cmss_files › imagelibraryFair Value Measurement - Hopkins and Howard

   www.hopkinsandhoward.com › cmss_files › imagelibrary

   After the market participant PFI has been determined (that is, entity-specific synergies have been removed), the IRR is derived by equating the sum of the prospective cash flows on a present-value basis to the consideration transferred, which assumes that the amount paid represents fair value.

6. kpmg.com › us › enAnalyzing prospective financial information - KPMG

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   Analysis of prospective financial information (PFI), also commonly referred to as financial forecasts, is critical when evaluating a company’s growth prospects and financial position. Recently, the level of focus on PFI has substantially increased as a result of various factors. As such, the use of PFI has been the subject of growing scrutiny ...

7. People also ask

   How do you conform a PFI to market participant assumptions?

   • Conforming the PFI to market participant assumptions usually starts with analyzing the financial model used to price the transaction, and adjusting it to reflect market participant expected cash flows.

   7.3 Business combinations - Viewpoint

   viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fair_value_measureme/fair_value_measureme__9_US/chapter_7_applicatio_US/73_business_combinat_US.html

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   Who should test a PFI?

   • Market participants may include financial investors as well as peer companies. Entities should test whether PFI is representative of market participant assumptions. Since the starting point in most valuations is cash flows, the PFI needs to be on a cash basis.

   7.3 Business combinations - Viewpoint

   viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fair_value_measureme/fair_value_measureme__9_US/chapter_7_applicatio_US/73_business_combinat_US.html

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   When is fair value based on market participant assumptions?

   • When there is no measurable consideration transferred (e.g., when control is gained through contractual rights and not a purchase), the fair value of the entity is still required to be measured based on market participant assumptions. Generally, the BEV is performed using one or both of the following methods:

   7.3 Business combinations - Viewpoint

   viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fair_value_measureme/fair_value_measureme__9_US/chapter_7_applicatio_US/73_business_combinat_US.html

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   What is a PFI & why is it important?

   • The PFI is a key input in the valuation process and it is important to understand the underlying assumptions. The PFI, adjusted to reflect market participant assumptions, serves as the source for the cash flows used to value the assets acquired and liabilities assumed.

   7.3 Business combinations - Viewpoint

   viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fair_value_measureme/fair_value_measureme__9_US/chapter_7_applicatio_US/73_business_combinat_US.html

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   Which market participant is a PFI based on Bev & IRR analysis?

   • Through the BEV and IRR analyses, the acquirer has identified the following market participant PFI for projected years one through five: The long-term sustainable growth rate is 3%. Based on the consideration transferred and Company A’s cash flows, the IRR was calculated to be 15%, which is consistent with the industry WACC of 15%.

   7.3 Business combinations - Viewpoint

   viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fair_value_measureme/fair_value_measureme__9_US/chapter_7_applicatio_US/73_business_combinat_US.html

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   Why is it important to reflect all elements of a PFI?

   • Because the IRR equates the PFI with the consideration transferred, it is important to properly reflect all elements of the cash flows and the consideration transferred. Nonoperating assets and liabilities, and financing elements usually do not contribute to the normal operations of the entity.

   7.3 Business combinations - Viewpoint

   viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/fair_value_measureme/fair_value_measureme__9_US/chapter_7_applicatio_US/73_business_combinat_US.html

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8. www.ifrs.org › content › damProject Fair Value Measurement Market participant view ...

   www.ifrs.org › content › dam

   Purpose of this paper. This paper addresses the market participant view in a fair value measurement. clarify the approach for developing market participant assumptions when observable data is not available (ie in Level 3 of the fair value hierarchy). This paper has been prepared by the technical staff of the FASB and the IASCF for discussion at ...