Mercer Capital's Financial Reporting Blog

New Guidance on Valuing Customer Relationships

What are your customer relationships worth? One of the most common intangible assets identified in a business combination is customer relationships, which can include customer lists, order or production backlogs, and contractual or noncontractual customer relationships. Many factors can influence the value of these types of assets, including the type of underlying business, the typical “life” of the relationship between the customer and the firm, and the presence of other assets in the firm (tangible or intangible) that contribute to value.

The Appraisal Practices Board of The Appraisal Foundation recently released an exposure draft of “The Valuation of Customer-Related Assets” in December 2013. This draft, an update to a discussion document initially circulated in June 2012, provides best practices guidance on the valuation of customer-related intangible assets. While this document is not intended to be an authoritative valuation standard, it does reflect a consensus of the most accepted methodologies and techniques used in the valuation profession to value such assets. Additional comments to the exposure draft are encouraged and should be submitted by March 1, 2014.

Mercer Capital has extensive experience valuing customer-related intangible assets in the context of purchase price allocation (ASC 805), impairment testing (ASC 350), and fresh-start accounting (ASC 852). Please call us today to discuss your valuation issues in confidence.

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Mercer Capital monitors the latest financial reporting news relevant to CFOs and financial managers. The Financial Reporting Blog is updated weekly. Follow us on Twitter at @MercerFairValue.