Multi-Period Excess Earnings Method (MPEEM)

Definition

An income approach valuation technique used to value a primary intangible asset by isolating the cash flows attributable to that asset after deducting fair returns on all other contributory assets (tangible and intangible) required to generate those cash flows. MPEEM is the most commonly used method for valuing customer relationships in purchase price allocations under IFRS 3 and ASC 805. The method requires careful identification of contributory assets, selection of appropriate contributory asset charges, and projection of asset-specific cash flows over the remaining useful life.