Following an acquisition, an acquirer is required by Accounting Standards Codification Topic 805, Business Combinations and International Financial Reporting Standard 3, Business Combinations to record the fair value of the assets acquired and liabilities assumed when setting up an opening balance sheet for an acquired entity. One category of assets is amortizable identifiable intangible assets. While not an intangible asset itself, the value of an assembled workforce (a contributory asset) affects the value of certain amortizable intangible assets.
The value of an assembled workforce is the cost to recruit and train a workforce to replace the service capacity of the one that has been acquired. But current calculations often have limitations. The assumptions acquirers use for recruiting and training costs typically do not reflect market data. And since consideration of market data is used in other aspects of acquisition accounting, it being omitted here often leads to under- or overvaluation of the assembled workforce valuation and, hence, amortizable intangible assets.
Towers Watson works with clients* and their current processes and advisors to bring our global market data and rigorous measurements to bear to create an informed assembled workforce.
Our assembled workforce services include:
- Aligning jobs
- Defining recruitment and training costs
- Incorporating company and market data
- Selecting assumptions and performing valuations
*Towers Watson works with companies’ current advisors as third-party specialists (as specified in AICPA Valuation Standards) to provide more robust inputs to their valuations.