In purchase accounting, valuation analysis begins with identifying intangible assets to be recognized apart from goodwill. The criteria for identifying these intangibles is set out in the FASB Accounting Standard Codification Topic 805, Purchase Accounting. The determinations are not always intuitive management’s guidance is critical, especially at the early stages of a project.
Buried deep in the LendingClub financial statements is a curious number. 7.2% is the investment return LendingClub believes their loans should earn for their investors. The 2016 return estimate, the weighted average across all loan grades, is down from 9.0% reported for 2015, presumably due to greater projected losses. It is consistent with the investment
Valuing a stand-alone portfolio holding is like guessing the position of a jumping-jack. Valuing the whole portfolio is more like predicting the position of a rider in the luge. When tracking portfolio performance, valuations can deliver surprisingly precise measurements: #1. Each individual valuation error is less significant at the portfolio level. #2. Valuation errors are
Any finance textbook will tell us that many, perhaps the majority of acquisitions fail. Failure is defined as the acquirer’s inability to recover economic value at least equal to the purchase price. Accurate analysis of acquisition outcomes is often complex. US GAAP addresses the issue by providing investors with: • intangible asset amortization as
Fair value is the amount for which a note could be bought or sold in a transaction between willing parties. The price represents a distillation of historical and expected charge-offs, prepayments, market risks, liquidity and required investor returns. Most consumer loans are not traded, thus accurate portfolio valuation relies on modeling informed by observed loan
Purchase accounting requires allocation of the purchase price among acquired assets on a fair value basis. The process is referred to as purchase price allocation (PPA) and it relies heavily on the valuation of acquired assets, mostly intangibles. PPA benchmarking is popular in assessing the reasonableness of any given PPA by comparing it with similar
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