Fair Value Measurement, 3rd Edition

APPENDIX 13AAuditing Fair Value Measurement in a Business Combination

AUDITOR QUESTIONS

This appendix includes a collection of questions auditors frequently ask after their review of the analysis supporting a business combination. The questions are grouped by valuation approach and other general questions.

GENERAL

1. How is the industry defined and what is the relevant SIC/NAICS Code? Were other industries were considered?
2. Is the company/industry young or mature? In what life cycle stage is the company/industry?
3. Is the company cyclical in nature? How does the current economic outlook impact the company's operating outlook?
4. Are any nonoperating or nonrecurring items included in the company's historic financial statements? Are there any discontinued operations?
5. What type of transaction structure did you assume in your analysis and how did you arrive at that assumption? Is the assumption of a stock transaction or asset purchase consistent with the client's projected financial information?
6. Were there any assets considered but not ultimately valued? If so, provide the rationale for not ascribing value to these assets. Were any assets acquired that management does not intend to use? If so, were any of these assets deemed to be defensive assets?
7. Explain how you have determined that fixed assets' book value reflects fair market value.
8. Are third‐party appraisals available for material fixed assets? If so, has the required return or pricing multiple been considered?
9. Has the capacity ...