Module V· Purchase Price Allocation (PPA) - Step-UpsIntermediate
Question

How do you treat receivables and payables in PPA?

Answer

Receivables and payables are measured at fair value at the acquisition date. Trade receivables are usually close to book value unless collectability or credit risk differs from carrying value. Payables are also often close to book value. The main DD focus is whether reserves, bad debt, rebates, and cut-off are adequate rather than creating large PPA step-ups.