ABV Goodwill & Intangible Asset Valuation 2

Question 1

Which of the following best defines 'assembled workforce' in the context of purchase price allocation?

Accepted Answer

A contributory asset used in the MPEEM but not separately recognized under ASC 805

Answer

A separately recognized intangible asset representing the trained employee base of an acquired company

Answer

The fair value of employment contracts with key management personnel

Answer

The replacement cost of recruiting and training the existing employee headcount

Question 2

The 'greenfield method' is most often used to value which category of intangible assets?

Accepted Answer

Licenses and operating permits with long remaining terms

Answer

Customer lists acquired in a business combination

Answer

Franchises and long-term supply contracts

Answer

Marketing-related intangibles such as trade dress

Question 3

When estimating the useful life of a customer relationship intangible, which analytical approach is most commonly used?

Accepted Answer

Historical customer attrition or churn rate analysis

Answer

Remaining contractual term of current customer agreements

Answer

Weighted average cost of capital for the industry

Answer

Replacement cost to re-acquire the customer base

Question 4

Under IRC Section 197, which of the following intangibles must be amortized over 15 years for tax purposes?

Accepted Answer

Goodwill and going-concern value acquired in an asset acquisition

Answer

Self-created intangibles developed internally before an acquisition

Answer

Separately acquired patents with a remaining legal life of 10 years

Answer

Covenants not to compete lasting less than five years

Question 5

Which metric is most commonly used to benchmark royalty rates when applying the relief-from-royalty method to technology intangibles?

Accepted Answer

Rates observed in arm's-length licensing transactions for similar technologies

Answer

Comparable company EBITDA multiples

Answer

Gross margin differentials between licensed and proprietary products

Answer

The subject company's historical return on equity

Question 6

The 'distributor method' is used in purchase price allocation primarily to value:

Accepted Answer

Customer relationships when the entity acts as a distributor of third-party products

Answer

Distribution rights and territorial licenses held by a company

Answer

The trade name when a distribution agreement restricts use of competing brands

Answer

Non-compete agreements with former distributors

Question 7

Which of the following is a key difference between personal goodwill and enterprise (entity) goodwill in a business valuation?

Accepted Answer

Enterprise goodwill transfers with the business, whereas personal goodwill is inseparable from an individual

Answer

Personal goodwill is always larger than enterprise goodwill in service businesses

Answer

Personal goodwill is reported on the balance sheet as a separate intangible asset

Answer

Enterprise goodwill is excluded from purchase price allocations under ASC 805