ASTM E3545-26

1.1 Purpose—The purpose of this practice is to provide instructions consistent with good commercial and customary practice to complete a purchase price allocation (PPA) involving environmental liabilities. A PPA reports the consideration paid by a buyer to a seller for a trade or business.

This guide is consistent with accounting principles and requirements of tax codes in most countries; in the US for example, the accounting citation is (FASB) ASC 805 Business Combinations and the tax code reference is Internal Revenue Code 26 CFR 1.1060 and IRS Form 8594.

In a given transaction, while there is an agreed price, the PPA values might not agree on all details. This practice is written for both buyer and seller to perform a PPA concurrently – though rarely on a joint basis.

1.2 The PPA period limits retrospective adjustments to 364 days after the transaction date, but in practical terms, the period has quarterly reporting deadlines within the preparers’ annual financial calendar.

Environmental liabilities are only some of the variables covered in the PPA for a larger business combination; accurate values are needed for debt, cash, inventory, pensions, product warranty claims and many more balance sheet items.

This practice solely focuses on environmental liabilities, and the identified work products must be delivered on the schedule for the entire PPA.

1.3 Serious consequences, ranging from failed financial audits, fines and penalties for filing false tax returns, restatements of financial reports, accusations of financial fraud to bankruptcy, exist for entities failing to complete a reliable purchase price allocation.

1.4 Objective—This practice enables users – of varying levels of experience - to consistently complete a reliable purchase price allocation involving environmental liabilities.

1.5 This international standard was developed in accordance with internationally recognized principles on standardization established in the Decision on Principles for the Development of International Standards, Guides and Recommendations issued by the World Trade Organization Technical Barriers to Trade (TBT) Committee.

5.1 The acquisition of a trade or business requires the calculation and agreement on consideration between buyer and seller, for tax calculations, communication with shareholders, and long-term capital stewardship.

A portion of that consideration may include transfer of environmental liabilities.

The values set for individual environmental liabilities in the purchase price allocation serves as the fair value measurement, an essential baseline measurement.