AI for Purchase Price Allocation: ASC 805 Business Combination Accounting with Claude (2026)

Purchase Price Allocation and AI

Every acquisition requires a purchase price allocation — a fair value exercise that must be completed within 12 months under ASC 805. The acquirer must identify every intangible asset, apply the appropriate valuation methodology, estimate a useful life, and compute the residual goodwill. Claude with ClaudeFinLab structures the PPA framework, applies valuation methods, computes deferred tax liabilities, and drafts the accounting documentation.

Identifying Intangible Assets

• "Identify the intangible assets to recognize in the PPA for this acquisition: acquired company is a B2B SaaS company, $42M ARR, 280 customers (average ACV $150K), 8-year average customer relationship, proprietary platform technology (5 developers, 3 years to build), 3 trade names (primary brand + 2 product brands), 2 non-compete agreements (with the 2 founders, 3-year terms), and a backlog of signed contracts ($18M committed ARR, 6-month average remaining term). List each intangible, the ASC 805 recognition criterion (separability or contractual/legal), and the appropriate valuation method."

Valuing Customer Relationships (MPEEM)

• "Value customer relationships using the multi-period excess earnings method (MPEEM): acquired ARR $42M. Attrition rate 8% per year. Contribution margin after direct costs: 72%. Required return on contributory assets: technology charge 3% of revenue, workforce charge 2% of revenue, working capital charge 0.5% of revenue. Excess earnings Year 1: $42M × (72% - 5.5%) = $27.93M × (1-0.08) survival = $27.93M. Discount at WACC 12%, with present value factor for mid-year convention. Compute customer relationship fair value for Years 1-10. Tax amortization benefit (TAB): 15-year tax amortization, apply TAB factor of 1.18. Final fair value."

Valuing Technology (Relief from Royalty)

• "Value developed technology using the relief from royalty method: the platform technology generates $42M ARR. Market royalty rate for comparable SaaS technology licenses: 15-25% of revenue (use 18% as selected royalty rate, reflecting moderate uniqueness). Revenue forecast Years 1-5 ($42M, $50M, $58M, $65M, $70M), declining thereafter as technology is updated/replaced. Technology obsolescence period: 7 years. Royalty savings: revenue × 18%. Apply tax-effected royalty savings, discount at WACC 12%, compute technology fair value with TAB."

Trade Name and Non-Compete Valuation

• "Value the primary trade name (SaaS product brand): relief from royalty method. Revenue attributable to the brand: $42M. Market royalty rate for comparable SaaS brand licenses: 1.5% of revenue (brand is recognized but not dominant). Revenue forecast: 5-year declining terminal period assuming brand migration post-acquisition. Tax-effected royalty savings at 25% tax rate. Discount at 13% (higher than WACC — reflects brand-specific risk). Final fair value. Useful life: indefinite (no amortization) or definite? ASC 350 test: if brand will continue in use indefinitely → indefinite life, tested annually for impairment."
• "Value the founder non-compete agreements: 2 founders, each with 3-year non-compete. With-and-without method: estimate company revenue WITH non-competes (base case projection) vs WITHOUT (revenue decline if founders compete). Estimate lost revenue if each founder competes: 15% of ARR for 18 months (conservative — not all customers follow founders). Total harm avoided by non-competes: Year 1 $3.2M, Year 2 $2.1M, Year 3 $0.8M (declining as customer relationships stabilize post-acquisition). Discount at 20% (non-compete-specific risk). Fair value per founder and total."

Goodwill Computation and Opening Balance Sheet

• "Compute goodwill and draft the opening balance sheet: Purchase price $185M. Fair value of net assets: current assets (cash $4.2M, AR $3.8M, prepaid $0.6M) = $8.6M. Intangible assets: customer relationships $62.4M, technology $28.5M, trade name $8.2M, non-competes $1.8M = $100.9M. Deferred tax liability on intangibles (25% tax rate on $100.9M FV - $0 book): -$25.2M. Current liabilities: deferred revenue ($6.8M, fair value adjustment: recognize only performance obligation remaining, reduce by 50%: adjusted $3.4M). Net identifiable assets: $8.6M + $100.9M - $25.2M - $3.4M = $80.9M. Goodwill: $185M - $80.9M = $104.1M. Build the opening balance sheet with fair value marks."

Where to Start

Begin with the intangible asset identification — walk through the acquiree's business model and ask Claude to list every intangible meeting the ASC 805 separability or contractual/legal criterion. For each identified asset, describe the revenue contribution and ask Claude to select the appropriate valuation method. ClaudeFinLab's valuation MCP server handles the DCF and excess earnings calculations; Claude handles the methodology selection and accounting documentation.