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Q&A Forum

Acquiree's treatment of deal fees.

Taking a quick glance through the guidance, however in most cases it speaks from the perspective of the acquirer (see below). What does the acquiree do with the deal fees it's incurred? Are they simply recorded directly to equity as in a funding/issuance of equity or does the answer require a read through the agreement to be definitive? Acquisition-Related Costs 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 3R.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.


Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

They are expensed as incurred. They will end up in retained earnings through the posting of the P&L.
If you are in a private company, you would reflect this as an add back to EBITDA as one time costs.

Topic Expert
Jim Quinlan
Title: CFO, Managing Director
Company: Trinity Group, BlueGold, Genergy, Wellco..
LinkedIn Profile
(CFO, Managing Director, Trinity Group, BlueGold, Genergy, Wellcount) |

Is this for a US or European transaction?

(Finance Director / Controller) |

US Co acquired by a European parent...

Topic Expert
Dana Price
Title: Vice President, M&A
Company: McGraw Hill Education
(Vice President, M&A, McGraw Hill Education) |

Recommend tracking them in a sep expense account as well, so it makes it easier for the add-back as Patrick mentioned. Or put it below the EBITDA line if that is a reporting option for your company.

Stephen Turk
Title: Principal
Company: Stephen Turk, CPA
(Principal, Stephen Turk, CPA) |

I would always read the deal documents. That said, if the buyer agreed to pay the acquiree's costs, those costs should have been accrued at the acquisition date. Assuming purchase accounting was applied and pushed down into the acquiree's financial statements, the additional liabilities assumed would increase goodwill.


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