What is Purchase Price Allocation In Accounting (PPA) And Components

It is a process of allocating prices of Assets And Liabilities of Acquiree Business. It is created by the Acquirer in order to purchase the assets & liabilities of acquiree's company business. This process is required in case of Mergers and Acquisition.

Purchase Price Allocation is used to find its useful components such as Net Identifiable Assets which is the difference between total values of targeted company's Identifiable Assets except Goodwill minus total values of its liabilities assumed.

Purchase Price Allocation is used by the acquirer (purchaser) in order to estimate Goodwill of the acquiree company’s business as the acquirer will purchase the business of acquiree company if Purchase Price is more than the sum of fair market value of Identifiable Assets, that include both Tangible Assets And Intangible Assets Except Goodwill, and fair market value of Liabilities assumed.