Abstract

One of the most critical phases in the Purchase Price Allocation process is represented by the determination of appropriate Costs of Capital to use in the application of income methods for the valuation of the identified intangible assets. In fact, the segregation of goodwill in the values of different identified intangible assets is a process that must be carried out in a consistent way to avoid under- or overvaluation of the assets and a consequent, subsequent need of impairment. While this aspect is quite obvious in the segregation of income/ cash flows for the application of the valuation methods (e.g., in case of the application of the Excess Earnings Method) it seems to be less evident in the selection of the appropriate Cost of Capital for single intangible assets, with possible under- or overvaluation on the discount side. In this work, a possible approach to estimate Costs of Capital for the Identified Intangibles Assets (IIAs) valuation process that should preserve consistency in the PPA is presented.