What is the step up in the purchase price allocation?

The step-up in purchase price allocation refers to the adjustment made to the fair market value of an acquired company's identifiable assets and liabilities during a business acquisition. This process involves increasing the recorded value of tangible and intangible assets to reflect their current market value, thereby potentially leading to higher depreciation or amortization expenses in future financial statements. The step-up helps provide a more accurate representation of the acquired company's financial position and is essential for tax purposes, as it can affect the taxable income of the acquiring entity.