Business Combinations:
I don't quite understand this question, but maybe I just can't read. Is there a difference between acquisition costs and acquisition-related costs? I'll check my book, but if someone could explain that would be great. Here's the question (the correct answer was D):
A combination is accounted for as an acquisition (initiated in a fiscal year beginning after December 15, 2008). Which of the following would be considered part of the acquisition cost of an acquired entity in a business combination?
Costs incurred by the acquiring entity that are directly related to the acquisition
Costs incurred by the acquired entity that are directly related to the acquisition
Indirect acquisition costs incurred by the acquiring entity
Incorrect A. I only
B. I and II only
C. I and III only
D. None of these items would be part of the acquisition cost.
Explanation in Ninja:
FASB ASC 805-10-25-21 requires that acquisition-related costs be charged to expense. All of these costs are acquisition-related costs and should be expensed in the period incurred.
FASB ASC 805-10-25-23 states the following:
Quote
Acquisition-related costs are costs the acquirer incurs to effect a business combination. Those costs include finder's fees; advisory, legal, accounting, valuation, and other professional or consulting fees; general administrative costs, including the costs of maintaining an internal acquisitions department; and costs of registering and issuing debt and equity securities. The acquirer shall account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities shall be recognized in accordance with other applicable GAAP.
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