SFAS No. 141 - Effective immediately, FASB’s Statement of Financial Accounting Standards No. 141 - Business Combinations eliminates the use of the pooling-of-interests method of accounting. Purchase accounting will be required for all future business combinations. As a result, an allocation of the purchase price paid in a business combination based on the fair value of the assets acquired (both tangible and intangible) and liabilities assumed is required. Moreover, intangible assets must be recognized as assets apart from goodwill if they meet one of two criteria (contractual-legal and/or separable).

SFAS No. 142 - Upon adoption of FASB’s Statement of Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets, the assets acquired, including goodwill and identifiable intangible assets, and liabilities assumed in a business combination that meet certain criteria are required to be assigned to a "Reporting Unit" as of the date of the acquisition. Previously recognized goodwill, such as that arising from previous business combinations, must also be assigned to one or more Reporting Units. Goodwill will no longer be amortized for financial reporting purposes. Instead, goodwill will be tested on an annual (if not more frequent) basis at the Reporting Unit level for possible impairment. As a result, the fair value of each Reporting Unit must be determined (typically by appraisal; a business enterprise valuation or a Reporting Unit valuation) at least annually and compared to the Reporting Unit’s carrying amount, including goodwill.

These accounting changes are a continuation of the recent trend towards reporting assets and liabilities at fair value as opposed to historical cost or book value. Moreover, these changes reflect that intangible assets are an important resource for many entities. Generally, intangible assets are an increasing proportion of the assets acquired in many transactions.

The valuation and impairment tests of SFAS No. 141 and No. 142 require supportable, well-documented and credible independent valuation analyses, such as those long provided by Management Planning, Inc. ("MPI"). A recent article in CFO.com recommends that you "hire reputable valuation experts" as the first of four tips to better transition into this "brave new accounting world."¹

MPI is a full service business appraisal firm, which has been providing independent valuation advice to corporations nationwide since 1939. Known and trusted by our clients and their advisors for providing credible, defensible gift and estate tax related valuations, MPI has also prepared hundreds of financial valuations of businesses, business interests and intangible assets in a wide variety of industries for many other purposes, including purchase price allocations, ESOPs, ERISA issues, litigation support, sale/merger and equity interest transactions, bankruptcy, marital dissolution and fairness opinions, among others. We have an exemplary track record of supporting our valuation opinions in various venues. MPI has the expertise, including deep industry and functional skills, to effectively address SFAS No. 141 and No. 142 and other complex valuation issues.

MPI stands ready to assist you and your accountants with the valuation related aspects of SFAS No. 141 and No. 142, either on a consultative basis or by providing independent valuation opinions and purchase price allocations that are thoroughly supportable and well reasoned. Our approach to SFAS No. 141 and No. 142 issues is to work closely with your accounting firm, providing valuation opinions and value added consultation and advice, as needed. With our dedicated purchase price allocation and intangible asset valuation team, MPI has the resources and experience necessary to perform business enterprise or reporting unit valuations, purchase price allocations and intangible asset valuations, as well as to offer related consulting services to assist in the accomplishment of your financial reporting compliance objectives.

MPI is committed to consistently delivering supportable valuation opinions and the highest quality documented reports to our clients. If you or your client has a need for intangible asset valuation, purchase price allocation and/or goodwill impairment valuation services, or if you would like to learn more about SFAS No. 141 and No. 142, please call or e-mail your MPI contact.

For those involved in acquisitions and divestitures, the services of MPI Securities, Inc. ("MPIS"), a NASD registered broker-dealer, may also be of interest to you. MPI Securities provides full service merger and acquisition advisory and private placement capabilities to privately held companies. For information on MPI Securities, Inc., please visit the MPIS website (www.mpisecurities.com) or contact James T. Dwyer at jdwyer@mpival.com or (609) 924-4200.

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¹ "Four ways to Say Goodbye to Goodwill Amortization," Craig Schneider, CFO.com, June 29, 2001.

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