Glossary
Purchase Price Allocation (PPA): What the Schedule Is and Why It Matters
Purchase price allocation is the process, after an acquisition closes, of dividing the total price paid across everything acquired, tangible assets, identifiable intangible assets, and goodwill, each recorded at fair value. The purchase price allocation schedule is the document that lists those asset classes and the value assigned to each. It is what turns a single deal price into the numbers a buyer will carry on its books and report for tax.
What goes on the schedule
A PPA schedule typically allocates the purchase price across categories such as working capital, fixed assets and equipment, identifiable intangibles (for example customer relationships or a trade name), and goodwill, which is the residual left after the identifiable assets are valued. The allocation must reconcile to the total consideration paid.
Why the allocation matters
How the price is split is not cosmetic. It drives the buyer’s future depreciation and amortization, its tax position, and how the acquisition appears in financial reporting. Two deals at the same price can produce very different after-tax outcomes depending on how the purchase price is allocated.
Where it sits in the deal
Purchase price allocation comes after the price is agreed, so it is distinct from the workstreams that get you there. A Quality of Earnings analysis tests whether the earnings are real, and a valuation addresses what the business is worth. PPA addresses how the agreed price is recorded. Because it is tax-driven, the filing work is typically handled with a tax partner rather than in-house.
Frequently asked questions
What is a purchase price allocation schedule?
A document that divides the total acquisition price across the acquired assets and liabilities at fair value, including any residual goodwill, and reconciles to the price paid.
Is purchase price allocation the same as a Quality of Earnings report?
No. A QoE tests whether the earnings are real before a price is set. PPA records how the agreed price is split across assets after close, mainly for tax and reporting.
Who prepares the purchase price allocation?
It is usually prepared with a tax adviser, because the allocation drives the buyer’s tax depreciation and amortization. We coordinate it through a tax partner alongside the diligence.
Where to next
For the diligence that happens before price is set, see the Quality of Earnings due diligence guide. To plan diligence on a specific acquisition, contact our transaction advisory team.
