Acquisition-related costs in a business combination
IFRS 3 generally requires the acquirer to expense acquisition-related costs as incurred and services are received. Costs to issue debt or equity securities are accounted for under the relevant financial instrument standards. These rules differ from directly attributable transaction costs included in the initial cost of many separately acquired assets. Do not add ordinary advisory fees to consideration transferred merely because they relate to an acquisition.
Worked example
An acquirer pays $1 million to sellers for a business and $40,000 to lawyers for acquisition advice. The $1 million is consideration transferred; the $40,000 legal fee is generally expensed, subject to the facts and applicable exceptions.
Common mistake
Including legal and due-diligence fees in goodwill by adding them to consideration transferred, or assuming asset-purchase and business-combination transaction costs always have the same treatment.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |