Walk through a complete PPA.
An advanced Group Accounting question — expect it in final rounds and case-heavy interviews (IB, PE, Big-4 Transaction Services).
THE SHORT ANSWER
Start with purchase price. Revalue all assets/liabilities to fair value. Recognize intangibles (customer lists, brands, technology, order backlog). Calculate DTL on every adjustment at local rate. Residual = goodwill. Example: Price EUR 12M, FV net assets EUR 9.82M = goodwill EUR 2.18M.
WHAT INTERVIEWERS LISTEN FOR
- ✓Purchase price allocation
- ✓Fair value adjustments
- ✓Recognize intangible assets
- ✓Deferred tax liabilities
- ✓Residual goodwill calculation
COMMON MISTAKES
- ✗Ignoring deferred taxes
- ✗Forgetting intangible assets
- ✗Using book values instead of fair value
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RELATED QUESTIONS
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- How do you account for the deferred tax on a fair-value uplift to PP&E in a business combination, and how does it affect goodwill and the group's effective tax rate over time?
- What approach would you take to allocate goodwill to cash-generating units (CGUs) in a goodwill impairment test when the CGUs are highly interconnected, and how would you determine the recoverable amount of each CGU considering these interconnections?
- How would you determine the recoverable amount of a cash-generating unit (CGU) that includes significant corporate assets, and what considerations should be given to the valuation of these corporate assets in the context of a goodwill impairment test?