ASA Intangible Asset Valuation 3

Question 1

In a purchase price allocation, the Weighted Average Return on Assets (WARA) should reconcile to:

Accepted Answer

The internal rate of return (IRR) implied by the acquisition price

Answer

The WARA should reconcile to the IRR of the transaction — the overall return implied by the purchase price — serving as a consistency check across all asset valuations in the purchase price allocation.

Question 2

In-process R&D (IPR&D) acquired in a business combination is required to be:

Accepted Answer

Recognized as an indefinite-lived intangible asset at fair value under ASC 805

Answer

ASC 805 requires that IPR&D acquired in a business combination be recognized separately as an indefinite-lived intangible asset measured at fair value until the project is completed or abandoned.

Question 3

Which of the following factors would most likely DECREASE the value of a customer relationship intangible?

Accepted Answer

High customer attrition rates

Answer

High customer attrition rates shorten the expected economic life of customer relationships, which directly reduces the present value of future cash flows attributable to those relationships.

Question 4

Under ASC 350, goodwill must be tested for impairment:

Accepted Answer

At least annually and whenever a triggering event indicates potential impairment

Answer

ASC 350 requires goodwill impairment testing at least annually at the reporting unit level and more frequently whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

Question 5

The Multi-Period Excess Earnings Method (MPEEM) is most appropriate for valuing:

Accepted Answer

The primary intangible asset driving the majority of a business's value

Answer

MPEEM is designed for the primary or dominant intangible of a business because it isolates residual earnings attributable to the subject asset after deducting contributory charges on all supporting assets.

ASA - American Society of Appraisers Certification Practice Test

ASA - American Society of Appraisers Certification Practice Test

ASA Intangible Asset Valuation 3