3.7 Transaction-Related Costs
Entities may incur certain transaction costs in connection with a carve-out transaction, such as
accounting and tax fees, legal fees, investment banking fees, and employee benefit costs. These
transaction-related costs should be analyzed for timing of recognition and allocation to carve-out
entities in accordance with the guidance in Section 3.1. If they are contingent on the closing of the
carve-out transaction, entities may apply the guidance in ASC 420 and ASC 805-20-55-50 and 55-51
by analogy. In accordance with this guidance, the costs should not be recorded until closing because
of the uncertainties involved (in a manner consistent with the accounting for costs associated with the
acceleration of vesting of share-based payment awards as described in Section 3.4.1.2).
Entities may sometimes give bonuses to employees for the successful divestiture of a carve-out entity. If
these employees do not work for the carve-out entity, such transaction bonuses should not be allocated
to the carve-out entity.