Under ASC 805, which of the following costs incurred in a business combination should be capitalized as part of the consideration transferred?

Answer options:

Legal and advisory fees

Costs to register and issue equity securities

General administrative costs of the acquisition department

None of the above

How to approach this question

Recall the treatment of acquisition costs: Direct costs (legal, consulting) -> Expense. Stock issuance costs -> Reduce APIC. Debt issuance costs -> Deferred charge/discount. None are capitalized to Goodwill.

Full Answer

D.None of the above✓ Correct

ASC 805 requires that acquisition-related costs (finder's fees, advisory, legal, accounting, valuation) be expensed in the period incurred. Costs to issue debt or equity securities are recognized in accordance with other applicable GAAP (usually as a reduction of the proceeds). They are NOT part of the consideration transferred.

Common mistakes

Capitalizing legal fees to Goodwill.

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