CVA Valuation of Intangible Assets Flashcards
6 cards from real Certified Valuation Analyst practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CVA Valuation of Intangible Assets flashcards as text
Under the purchase price allocation (PPA) process in business combinations, intangible assets are recognized separately from goodwill when they:
Answer: Arise from contractual or legal rights, or are separable from the business
ASC 805 requires separate recognition of intangibles that meet the contractual-legal or separability criteria, with remaining unallocated value classified as goodwill.
The Relief from Royalty method is most commonly used to value:
Answer: Trade names and trademarks
The Relief from Royalty method values intangibles by estimating the royalty payments the company is 'relieved' from paying because it owns the asset, most naturally applied to trademarks.
The Multi-Period Excess Earnings Method (MPEEM) is primarily used to value:
Answer: A primary intangible asset driving business value, such as customer relationships
MPEEM values the primary intangible by attributing to it the residual earnings after compensating all contributing assets (charges), making it well-suited for customer relationships.
Contributory asset charges (CACs) in the MPEEM are used to:
Answer: Remove the return on other assets so that only the earnings attributable to the subject intangible remain
CACs represent the required returns on all contributing assets (working capital, fixed assets, other intangibles), stripping them out to isolate the subject intangible's earnings contribution.
Goodwill in a business combination under GAAP is defined as:
Answer: The excess of the purchase price over the fair value of identifiable net assets acquired
Goodwill is a residual — the purchase price paid beyond what can be allocated to individually identified and measured assets and liabilities.
The useful life assigned to a customer relationship intangible in a PPA is typically based on:
Answer: Historical customer attrition rates and expected revenue decay patterns
Analysts model expected customer revenue decay using historical retention and churn data to estimate how long the existing customer base will generate above-market returns.
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