Valuations case study

How one company was able to effectively document fair value for both tax and financial reporting purposes

The issue: Our client was a global public company looking to complete a strategic acquisition as part of its expansion strategy. The company needed to value all tangible and intangible assets for financial reporting purchases and legal entities for tax purposes. The company also needed to review specific long-term contracts from an accounting perspective.

Our approach: We worked closely with management to understand all the issues related to the deal that would affect financial and tax reporting. We met with the company and their audit team regularly to understand the framework of the valuation analysis. We also helped the company understand the deal issues that would affect accounting and taxes such as fair value of inventory and long-term contracts, complex accounting issues like embedded derivatives, FAS 109, transfer pricing planning ideas, and tax capitalization vs. expensing of transaction costs. PwC also developed an innovative methodology for the valuation of customer relationships.

The outcome: The company was able to effectively document the fair value of assets for financial and tax reporting purposes as well as manage their internal (corporate) and external (auditor) process effectively without any late issues.

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