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direct “out-of-pocket” costs or incremental costs directly related to the asset acquisition, such as
finders’ fees, appraisals, and costs for lawyers and accountants. Such costs are a component of the
consideration transferred and is capitalized as part of the cost of the assets acquired.
fees; and general and administrative costs. Acquisition-related costs are considered
transferred but, rather, expensed as incurred or when the service is received [ASC
805-10-25-23; IFRS 3.53]. These costs are not considered part of the fair value of a
represent services that have been rendered to and consumed by the acquirer.
Costs related to the issuance of debt are capitalised and amortised into earnings
[profit or loss] over the term of the debt [ASC 835-30-45-1 through 45-4; IAS 39R.43;
IAS 39R.47]. Costs related to the issuance of equity reduce the proceeds received from
the issuance.
must be allocated between direct costs of the acquisition and those related to
A acquired Company B for 70 percent cash and the balance in preferred shares and
debt and Company A hired an investment banker to handle the financing and
underwriting services. The costs paid to the investment banker should be allocated
(generally recorded as part of the cost of the debt or equity issuance) and all other
recorded as an expense in the income statement. The only exception is the treatment of costs to
issue debt or equity, which are treated as reduction of proceeds of the related instruments (IFRS
3.53) • also applies to acquisition costs paid by the acquiree or its former owners and reimbursed by
the acquirer (IFRS 3.52(c))
amount of acquisition-related costs, including the: – amount recognised as an expense and the line
item or items in the statement of comprehensive income in which those expenses are recognised –
amount of any issue costs not recognised as an expense and how they were recognised
They are capitalised as part of the cost of the asset(s) acquired in the case of asset acquisitions but
recognised as an expense in the case of business combinations, with the exception of costs to issue
debt or equity securities.
the disclosure of separately recognised transactions required by (l) shall include the amount of
acquisition-related costs and, separately, the amount of those costs recognised as an expense and
the line item or items in the statement of comprehensive income in which those expenses are
recognised. The amount of any issue costs not recognised as an expense and how they were
This is partly because all of the consideration, including any previously held interest
in the acquired business, is measured at fair value but it is also because goodwill
can be measured in two different ways.
1. Goodwill is the difference between the consideration paid and the purchaser's share
of identifiable net assets acquired. This is a 'partial goodwill' method because the
non-controlling interest (NCI) is recognised at its share of identifiable net assets and
does not include any goodwill.
2. Goodwill can also be measured on a 'full goodwill' basis, which means that goodwill
is recognised for the non-controlling interest in a subsidiary as well as the controlling
interest.