As part of an asset acquisition, an acquirer may incur various acquisition-related costs, which include

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.

An acquirer in a business combination typically incurs acquisition-related costs, such

as finder’s fees; advisory, legal, accounting, valuation, other professional or consulting

fees; and general and administrative costs. Acquisition-related costs are considered

separate transactions and should not be included as part of the consideration

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

business and, by themselves, do not represent an asset. Acquisition-related costs

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.

Fees paid to an investment banker in connection with a business combination, when

the investment banker is also providing interim financing or underwriting services,

must be allocated between direct costs of the acquisition and those related to

financing or underwriting the business combination. For example, assume Company

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

between those that related to financing or underwriting the business combination

(generally recorded as part of the cost of the debt or equity issuance) and all other

services that should be expensed as incurred.

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

recognised shall also be disclosed.

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.

If the purchase consideration is larger than the net fair value