What is purchase price allocation (PPA), and what components is the purchase price allocated to?

PPA allocates the acquisition purchase price to the assets acquired and liabilities assumed at fair value. Typical components are PP&E step-ups, inventory step-ups, identifiable intangible assets, lease assets and liabilities, pension liabilities, deferred taxes, and goodwill as the residual. The output drives future D&A, amortization, deferred tax, impairment risk, and EPS.