Determining the fair value of assets and liabilities for fresh-start accounting can be complex and requires a thorough understanding of the business, its assets and liabilities, industry / economic conditions, as well as the latest best practices in valuation.

On September 5, 2013, the IRS issued proposed regulations that are intended to clarify what most taxpayers already understood to be correct for the past 60 years. In particular, the proposed regulations, if adopted, make abundantly clear that the ultimate use of a product does not alter the nature of the expenditures incurred by the taxpayer to eliminate uncertainty.

Issue 35-2013 — If you are acquiring assets, make sure you really believe — and are willing to live with — the purchase price allocation agreed to and reflected in your purchase agreement. In other words, if you think you can do a more detailed review and adjust this allocation later, think again! In a recent decision (Peco Foods Inc. v. Commissioner, No. 12-12169 (11th Cir. July 2, 2013)), the U.S. Court of Appeals for the Eleventh Circuit upheld a Tax Court decision that a taxpayer could not retroactively modify a purchase price allocation by changing the descriptions in its allocation agreements related to the asset purchases of two plants. Specifically, Peco (the taxpayer) could not use the results from a cost segregation study to accelerate deductions in a manner that was inconsistent with the original contractually agreed to purchase price allocation. 

Information Technology integration costs are frequently the largest cost factor in an M&A transaction’s overall return. While many CIOs have the base knowledge needed to accurately estimate these costs, many are not experienced with articulating and defending their estimates in a meaningful way to the investment team. As a result, the combined entity’s desired IT capabilities may not be achieved or significant IT integration delays or cost overruns may be more likely.

Governments are aggressively enforcing anti-bribery laws and regulations, such as the U.S. Foreign Corrupt Practices Act (FCPA) and the U.K. Bribery Act, with increasing regularity. The FCPA, in particular, makes it illegal to corruptly offer or provide money or anything of value to government officials with the intent of obtaining or retaining business.