HomeServicesFinancial Reporting

Financial Reporting

Stern Brothers is a thought leader in the financial reporting space. We have experts who have publications and sit on the board of governing bodies for fair value accounting. We have worked with both publicly traded and privately held companies to tackle financial reporting complexities. Our roots have been grounded for over a century, which gives us a leg up with understanding the changing markets, new intangible assets to be valued, new processes, and investors’ sentiment with various risk aspects.

Purchase Price Allocation

Stern Brothers has worked with thousands of businesses from startups to Fortune 100 companies. We leverage our industry knowledge and over 104 years of perfecting our valuation craft to deliver our clients the best work on the market. Through the years we have combined our strong attention to detail with our ability to accurately assess markets to provide a high-quality and cost effective service.

This is an important standard that requires the acquiring company to allocate the purchase price to three groups (i) tangible assets, (ii) identifiable intangible assets (e.g. brand and patents), and (iii) goodwill. The allocation is important for long-term reporting of the Company because it affects the health of the balance sheet as well as the bottom line.

It is imperative to provide a consistent and accurate valuation that does not overstate the value of the identifiable intangible assets or goodwill. If goodwill is overstated it can create a future impairment loss but if intangible assets are overstated the amortization will drop Net Income by too much. Our team of independent intangible asset valuation experts has worked with hundreds of satisfied repeat clients. We have smoothed the financial reporting process with the audit team and have saved each client thousands of dollars through a timely and efficient valuation process.

ASC Topic 805-Subtopic 55 provides examples of identifiable intangible assets and categorizes such assets as follows: marketing-related, customer-related, artistic-related, contract-based and technology-based assets.

Examples of assets within each category:

Marketing-related intangible assets
  • Trademarks
  • Trade names
  • Trade dress
  • Service marks (collectively referred to as “trade names”)
  • Non-competition agreements
Customer-related intangible assets
  • Customer lists
  • Order or production backlog
  • Customer contract
  • Related customer relationships
  • Non-contractual customer relationships
Artistic-related intangible assets
  • Books
  • Magazines
  • Other literary works
  • Pictures
  • Photographs
  • Audio-visual materials
Technology-based intangible assets
  • Patented and unpatented technology
  • Computer software
  • Databases
  • Trade secrets
  • Formulas
  • Proprietary processes
Contract-based intangible assets
  • Licensing
  • Royalty and standstill agreements
  • Advertising
  • Service or supply contracts
  • Lease agreements
  • Construction permits
  • Franchise agreements
  • Operating and broadcast rights
  • Use rights (such as drilling, etc.)
  • Servicing contracts
  • Employment contracts

Impairment Testing

Our team is well versed under the generally accepted accounting principles (GAAP). If you are on the buy side of an M&A deal you are required to allocate the purchase price to the identified assets acquired as part of the transaction (e.g. the brand, patents, or goodwill). Following the purchase price allocation, there will be annual impairment testing for the Goodwill. The accounting for intangible asset impairment is outlined under ASC 350 – Intangibles – Goodwill and Other. In addition to impairment for Goodwill, GAAP outlines separate rules for the subsequent measurement of finite-lived intangible assets under ASC 360.

The accounting rules outlined for impairment testing are complex and require experts focused on intangibles to correctly assess intangible asset impairment. We have experts who are credentialed in entity intangible valuations (i.e. CEIV). Our thorough analyses will demystify the complexities for you and your CPA and will satisfy the rigors of the audit process. More importantly, our experts will save you time and money, which we have done time and time again for thousands of clients.

Questions?