---
title: Purchase Price Allocation UAE | PPA Services | Assetica
description: Purchase price allocation UAE: intangibles, goodwill and deferred tax measured independently under IFRS 3, built for audit review. Book a scoping call.
url: https://assetica.net/services/purchase-price-allocation/
source: Assetica, independent business valuation firm, Dubai and the UK
---

# Purchase Price Allocation Services in Dubai & UAE

By [Bill Anderson](https://assetica.net/team/bill-anderson/), FCCA, Chief Executive Officer — Assetica, Dubai, UAE

**Definition:** Purchase price allocation (PPA) is the accounting exercise IFRS 3 Business Combinations requires when an acquirer obtains control of a business. The price is allocated across the identifiable assets acquired and liabilities assumed, measured at fair value with limited exceptions. That includes intangibles the target never recorded, such as customer relationships, brands and technology. Any positive residual is goodwill. In the UAE, it applies to acquirers reporting under IFRS.

## Key Takeaways
- IFRS 3 requires a purchase price allocation when an IFRS reporter obtains control of a business, except in common control reorganisations.
- Customer relationships, brands, technology, order backlog and non-competes are recognised apart from goodwill when they meet the IFRS 3 criteria.
- Provisional figures can be refined for up to twelve months from the acquisition date; after that, only errors can be corrected.
- In a share deal, UAE Corporate Tax means fair value uplifts usually create a deferred tax liability.
- Prepared to RICS, IVS and IFRS standards by an independent team led by a former RBS Global CFO.

Assetica prepares independent purchase price allocation reports for acquirers across the UAE, from our office in Barsha Heights, Dubai. We identify what you actually bought, put a fair value on each intangible, and calculate goodwill and deferred tax. The result is a report your auditor can test line by line. That matters because the allocation is not a formality. It sets your amortisation charge, your goodwill balance and your impairment exposure for years. Our work is prepared to RICS, IVS and IFRS standards and draws on over 500 valuations across 15+ countries. We do not broker deals or take success fees, so our fee does not depend on the answer.

## When Do You Need a Purchase Price Allocation in the UAE?

You need a purchase price allocation when a company reporting under IFRS obtains control of a business, whether by buying a controlling stake or through a shareholder agreement. An asset deal counts too if what you buy includes at least an input and a substantive process that together significantly contribute to the ability to create outputs. Gaining control in stages also counts, and your earlier stake is remeasured to fair value. Some transactions fall outside IFRS 3. Moving businesses an owner already controls under a new holding company is a common control reorganisation, which the standard excludes. Buying assets that are not a business creates no goodwill, and the cost is split by relative fair value. An optional concentration test rules out a business when substantially all the fair value of the gross assets sits in one asset or group of similar assets. A stake bringing significant influence is equity accounted under IAS 28, which still needs the investee's identifiable net assets at fair value.

## What Does IFRS 3 Require in a Purchase Price Allocation?

IFRS 3 applies the acquisition method. You identify the acquirer and fix the acquisition date, the day control passes, which is usually completion rather than signing. Consideration is measured at fair value, including deferred and contingent amounts. Identifiable assets and liabilities are then recognised at fair value, as defined in IFRS 13. An intangible is identifiable if it arises from contractual or legal rights, or could be separated and sold, licensed or exchanged. Fair value takes a market participant view. A brand you intend to retire must still be valued as other buyers would use it. A contingent liability is recognised if it is a present obligation whose fair value can be measured reliably, even when payment is not probable. A few items follow their own standards. End-of-service gratuity is measured under IAS 19, leases where the target is the lessee are remeasured as if new, and replacement share awards follow IFRS 2. Deal costs are expensed as incurred, except the costs of issuing debt or equity.

## How Are Intangible Assets Valued in a PPA?

Each intangible is valued with the method that matches how it earns. Customer relationships are usually valued with the multi-period excess earnings method. It projects cash flows from existing customers, charges a fair return for every supporting asset, then discounts what remains. Brands and many technology assets are valued by relief from royalty, which prices the licence fee the owner avoids. Non-compete agreements suit the with-and-without method, comparing the business with and without the protection. Order backlog is valued on the margin left in signed, unfulfilled orders. Software may instead be valued at rebuild cost, less obsolescence. Regulated licences may need a greenfield model, which builds the business from scratch around the licence. The assembled workforce is never recognised separately, but it still carries a contributory charge. Inputs drive the answer: attrition from your own customer history, royalty rates from comparable licences, and a discount rate for each asset's risk. A brand with an indefinite useful life is not amortised, but is tested for impairment every year.

## How Are Earn-Outs and Minority Interests Treated Under IFRS 3?

IFRS 3 treats an earn-out in two stages. On the acquisition date, contingent consideration is measured at fair value, usually by weighting the possible outcomes by probability and discounting them. Later changes caused by actual performance do not touch goodwill. Where the earn-out is a liability, those changes run through profit or loss. Payments to sellers who stay in the business need a closer look. If the earn-out is automatically forfeited when a seller leaves, IFRS 3 treats it as pay for future service, not part of the price. Buying less than the whole company raises a second choice. The non-controlling interest can be measured at fair value or at its share of identifiable net assets, deal by deal, and the choice changes goodwill. A minority stake's fair value needs its own evidence, because it may not equal a pro rata slice of the price. If the numbers show a bargain purchase, IFRS 3 requires the whole allocation to be reassessed before any gain is recognised.

## What Do Auditors Check in a PPA Report?

Auditors usually treat a PPA as a significant accounting estimate under ISA 540, so the report must let them re-perform it. They start with reconciliation. The deal's internal rate of return, the weighted average cost of capital and the weighted average return on assets should tell one consistent story. Goodwill should usually carry the highest implied return, because it is the riskiest asset. Next, each input is tested. Attrition is compared with customer history, royalty rates with comparable licences, and forecasts with the deal model the board approved. Contributory asset charges are checked for completeness, and deferred tax is recalculated. Useful lives are challenged. Goodwill must also be allocated to the cash-generating units expected to benefit from the deal's synergies, which sets up the first IAS 36 impairment test. A strong report states its basis of value, valuation date and sources, and shows which assumptions move the answer. No adviser can promise an auditor's conclusion. A good file answers the predictable questions before they are asked.

## What Are the Most Common Purchase Price Allocation Mistakes?

One expensive mistake is leaving the whole premium in goodwill. It flatters early profit, because goodwill is not amortised, but invites audit challenge and leaves a larger balance exposed to impairment. Another is reusing the deal model unchanged. That model priced the business for one buyer and may include synergies other buyers could not achieve. A PPA needs market participant cash flows, asset by asset, each discounted at its own rate. Double counting is a related risk, for example valuing customer relationships without a contributory charge for the brand. Quieter errors follow. The target's bad debt allowance is carried across, when receivables should be measured at fair value. The inventory step-up is missed, although it squeezes gross margin as that stock is sold. Founder earn-outs tied to continued employment are booked as consideration. Provisional figures drift past the measurement period, after which only errors can be corrected. Most of these are avoidable if the work starts soon after completion.

## How Does UAE Corporate Tax Affect a Purchase Price Allocation?

UAE Corporate Tax, under Federal Decree-Law No. 47 of 2022, charges 9% on taxable income above AED 375,000. Deferred tax is now a real line in UAE allocations. In a share deal, fair value uplifts sit only in the group accounts, while the target keeps its existing tax base. That gap creates a deferred tax liability under IAS 12, which increases goodwill. The rate needs evidence. A Qualifying Free Zone Person may pay 0% on qualifying income. Because the first AED 375,000 is taxed at 0%, IAS 12 requires the average rate expected on reversal, which matters most where profits are modest. In an asset deal, the allocation sets the buyer's own book values, which feed the accounting profit that taxable income starts from. Related-party deals must also meet the arm's length principle. A DIFC or ADGM holding company changes the legal wrapper, not the accounting. Watch your lenders too: amortisation reduces profit but not EBITDA, while an inventory step-up reduces both. Check how your facility agreement defines earnings.

## What's Included
- IFRS 3 scope review, including the business test and acquisition date
- Identification of every intangible that meets the IFRS 3 criteria
- Fair values for customer relationships, brands, technology and backlog
- Fair value of earn-outs, non-controlling interests and prior stakes
- Deferred tax on fair value uplifts at UAE Corporate Tax rates
- Goodwill or bargain purchase, reconciled through IRR, WACC and WARA
- Useful lives, amortisation schedules and goodwill allocation to CGUs
- Full report, working papers and support through auditor queries

## Our Process

**Scoping Call:** We discuss the deal, its structure and your reporting deadline, agree what needs valuing, and confirm a fixed fee and timetable in writing.

**Data and Identification:** We review the SPA, data room and deal model, interview management, and list every asset and liability that meets the IFRS 3 criteria.

**Valuation and Reconciliation:** Each intangible is valued by the method that fits it. Deferred tax and goodwill follow, reconciled to the deal's internal rate of return, WACC and WARA.

**Report and Audit Support:** You receive the report, working papers and amortisation schedules. We answer your auditor's questions and help finalise provisional figures within the measurement period.

## Further Reading
- [Purchase Price Allocation Explained: How Acquisitions Are Valued Under IFRS 3](https://assetica.net/blog/purchase-price-allocation-ifrs-uae/)
- [Valuation for Financial Reporting in the UAE: PPA, Impairment, IFRS 13](https://assetica.net/blog/valuation-financial-reporting-uae/)
- [How Intangible Assets and Brands Are Valued in the UAE](https://assetica.net/blog/intangible-asset-brand-valuation-uae/)
- [Earn-Outs Explained: How Deferred Consideration Works in a UAE Business Sale](https://assetica.net/blog/earn-out-deferred-consideration-uae/)
- [Asset Deal vs Share Deal: Which Structure Actually Gets You the Best Outcome?](https://assetica.net/blog/asset-deal-vs-share-deal/)

## Frequently Asked Questions

What is a purchase price allocation?

A purchase price allocation splits the price of an acquisition across the fair value of what the buyer actually acquired. That includes assets the target never recorded, such as customer relationships, brands and software, and the liabilities assumed. The residual is goodwill. The split matters because intangibles with finite lives are amortised, reducing profit for years, while goodwill is tested for impairment every year under IAS 36.

How do you calculate purchase price allocation?

You compare what you paid with what you acquired. Take the consideration transferred, including contingent consideration at fair value, plus any non-controlling interest and the fair value of any stake already held. Deduct the identifiable net assets, measured mostly at fair value, including new intangibles and the deferred tax on each uplift. A positive result is goodwill. A negative result signals a bargain purchase, which must be reassessed before a gain is recognised.

What are PPA adjustments?

PPA adjustments are the differences between the target's book values and the fair values recognised on acquisition. Typical examples are new intangible assets, uplifts on property or inventory, fair value changes to receivables and the deferred tax on each. They unwind through later results as amortisation, depreciation and a higher cost of sales. The term also covers measurement period adjustments, which update provisional figures for facts that existed at the acquisition date.

Is a purchase price allocation mandatory in the UAE?

Yes, for any company reporting under IFRS that obtains control of a business. That applies on the mainland, in free zones and in the DIFC and ADGM alike. If the work is not finished by the next reporting date, IFRS 3 requires provisional figures. Groups using IFRS for SMEs face a similar exercise under Section 19 of that standard. A reorganisation under common control, or a purchase of assets that are not a business, falls outside IFRS 3.

Does a purchase price allocation affect UAE Corporate Tax?

It affects the tax accounting, and sometimes the tax itself. In a share deal, the target's tax base does not change, so uplifts in the consolidated accounts create a deferred tax liability rather than a tax payment. That liability is measured at the rate expected to apply, which may be 0% on a Qualifying Free Zone Person's qualifying income. In an asset deal, the allocated values enter the buyer's own accounts, the starting point for its taxable income. Related-party deals must also meet the arm's length principle.

Can our auditor prepare the purchase price allocation?

Usually not, because the auditor would then be reviewing its own work. Independence rules restrict auditors from valuing amounts they will later audit. Management therefore normally commissions the PPA from an independent valuer, and the auditor tests it as a significant estimate. Assetica is an independent valuation firm, and we do not broker deals or take success fees. Our job is to give your auditor an allocation they can trace from input to answer, and to respond to their questions until the figures are final.

How long does a purchase price allocation take?

Timing is confirmed at the scoping call, and it is usually driven by data availability. The pace depends on how quickly we receive the SPA, completion accounts, deal model, customer history and key contracts. IFRS 3 allows up to twelve months from the acquisition date to finalise provisional figures. In practice, your next audit sets the working timetable, so it pays to start soon after completion.

How much does a purchase price allocation cost in Dubai?

Assetica does not publish a price list, because no two acquisitions need the same work. Fees are fixed after a scoping call and confirmed in writing before anything starts. The main drivers are the number of intangibles, any earn-out or minority interest, the number of entities and jurisdictions, and the state of the data. We do not take success fees.

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