Practitioner Alert on Purchase Price Allocations

There was a blog item the other day on valuation, specifically on ASC 805 business combinations. Anecdotally, from what we hear at BVR, this work is picking up.  One practitioner is running into audit scrutiny he hasn’t seen before, including the question, “Why didn’t you use Relief from Royalty” method when calculating the value of specific IP assets?

This is new to this practitioner (are others hearing the same question?), but it ties in to what the courts have been saying all along: You have to justify the methodology you use to develop a valuation, as well as defend the non-use of other methods. In other words, valuation analysts have to explore alternative methods of valuation and justify their choices. It’s not new. It’s now established practice. What may be new is the specific request for “relief from royalty” analysis. If this is happening to you, remember BVR’s ktMine royalty rate database takes such research to unheard of specificity and allows access to the full text of the licenses behind the royalty rates.