Purchase Accounting

Sep 29, 2006 3 Replies

We are a community bank interested in evaluating a merger from a purchase accounting perspective. Our stock is not publicly traded and has no ready market value. How would we value an acquisition assuming we issue stock for the target?



We are looking to prepare a proforma to reflect the transaction. Does anyone have a source explaining the general accounting or a sample which can be easily read and understood which discusses purchase accounting and proformas including the valuing of goodwill and potential writeoff of intangibles.



Valuing potential bank acquisistions requires expertise beyond looking up samples on a website. You can pay others to perform the analysis like using

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but be forewarned - the analysis or accounting principles may not be "easily read and understood"!

I think you are looking at the problem from the wrong perspective. If it were up to me to come up with a justifiable stock value I would look at the price/earnings ratios for the publicly traded companies in my industry and apply the same ratio to the stock(s) being evaluated.

Once you have determined a stock value the difference between equity and the selling/purchase price is the goodwill.

HTH

Jerry

These are questions for your CPA firm/other knowledgeable advisor.

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