7.8 Transactions That Are Separate From the Business Combination
ASC 805-10
50-2 To meet the objective in
paragraph 805-10-50-1, the acquirer shall disclose the
following information for each business combination that
occurs during the reporting period: . . .
e. For transactions that are recognized separately
from the acquisition of assets and assumptions of
liabilities in the business combination (see
paragraph 805-10-25-20), all of the following:
1. A description of each
transaction
2. How the acquirer accounted
for each transaction
3. The amounts recognized for
each transaction and the line item in the financial
statements in which each amount is recognized
4. If the transaction is the
effective settlement of a preexisting relationship,
the method used to determine the settlement amount.
. . .
7.8.1 Acquisition-Related Costs
ASC 805-10
50-2 To meet the objective in
paragraph 805-10-50-1, the acquirer shall disclose the
following information for each business combination that
occurs during the reporting period: . . .
f. The disclosure of separately recognized
transactions required in (e) [ASC 805-10-50-2(e)]
shall include the amount of acquisition-related
costs, the amount recognized as an expense, and
the line item or items in the income statement in
which those expenses are recognized. The amount of
any issuance costs not recognized as an expense
and how they were recognized also shall be
disclosed. . . .
Acquirers typically incur acquisition-related costs — such as third-party costs
for finders’ fees — as well as advisory, legal, accounting, valuation, and other
professional or consulting fees. ASC 805-10-25-23 states, in part, that “[t]he
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” (see Section 5.4.1). ASC 805-10-50-2(f) requires an entity to disclose:
-
“[T]he amount of acquisition-related costs.”
-
“[T]he amount recognized as an expense.”
-
“[T]he line item or items in the income statement in which [the] expenses are recognized.”
-
“The amount of any issuance costs not recognized as an expense and how they were recognized.”
While entities will often incur acquisition-related costs in the reporting periods before an acquisition,
the disclosures specified in ASC 805-10-50-2 are required only for business combinations that occur
during the current reporting period or after the reporting date but before financial statements are
issued unless the initial accounting for the business combination is incomplete at the time the financial
statements are issued or are available to be issued.