Purchase Accounting
Short definition
Purchase accounting allocates the price to identifiable assets at fair value and writes the rest as goodwill (PPA). Post-close depreciation and margin no longer look like the target’s historic P&L.
Detailed explanation
Inventory, brands, customer contracts and liabilities are remeasured. An inventory step-up inflates post-close COGS; “margin fell” is accounting, not operations.
Deferred tax arises from fair-value gaps. Bank EBITDA may add those charges back — the definition must be locked.
Why it matters for the CFO
If the post-close budget is not written on PPA-clean EBITDA, the miss is labelled “failed integration”.
How to read it
PPA is not a cash outflow; cash left at close. Amortisation is not cash but can move the tax base.
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Definitions are educational. They are not investment, credit or tax advice.