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How do you calculate the cost of an acquistion?

All of you start-up finance and accounting folks, I have a question that a quick internet search didn't assist me with, so I wanted to reach out to you. If I am starting up a business, irrespective of its industry, what items would be included in the cost of the acquisition? Legal fees? Flatware (for restaurants)? Etc? What items are you capitalizing as acquisition cost?

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Capitalization:

Legal and incorporation fees, license fees, maybe R & D (research, T & E related to R & D),etc.

Best bet is to look at your accounting text books which gives the answer to your question.

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Thanks, Wayne.

Those are some of the things I was thinking also. I'm sure there's more, especially when different industries are considered.

My wife had an interview with a college yesterday who is looking for an accounting 101 teacher. She's an accountant by education and has her master's degree in teaching. And this question took her by surprise.

She has limited exposure to corporate accounting, which led her to be surprised by the question. She's previously worked for one national company and an international company as a sales tax analyst at one, and an accounts payable auditor at the other.

jason gentile
Title: Peer Tutor
Company: Anne Arundel Community College
LinkedIn Profile
(Peer Tutor, Anne Arundel Community College) |

http://smallbusiness.chron.com/accounting-rules-expensing-vs-capitalizing-amortizing-costs-37284.html
https://www.americanexpress.com/us/small-business/openforum/articles/4-tax-rules-for-legal-fees/
http://www.accountingcoach.com/blog/capitalize
http://smallbusiness.chron.com/rd-expenses-not-capitalized-43690.html
Link for your acquisition cost question. Look at the IRS publication related to acquisition cost. Also the IRS publication on expensing and capitalizing costs.
What are the materiality convention for the company? What amount does the company consider material for that item? Assuming this would be a small business, (start-up restaurant) the assets like Flatware (forks, knifes, bowls, spoons) might be expensed if under $500. Some of the legal fees could be expensed under IRS rules if they meet the requirements in that link I'm giving you. The R&D should probably not be capitalized. Read the articles in the links I'm giving you and the IRS publications. Use your own professional judgment in this matter and do not credit me for any decisions you make based on this post. Hope this helps.

jason gentile
Title: Peer Tutor
Company: Anne Arundel Community College
LinkedIn Profile
(Peer Tutor, Anne Arundel Community College) |

http://www.accounting-and-bookkeeping-tips.com/accounting-forum/viewtopic.php?f=4&t=7925&start=0
Link for information on the flatware. If you know of any openings for an accountant or auditor let me know.

Akram Siblee
Title: Manager- Planning and Business Analysis
Company: Rahimafrooz BD Ltd.
(Manager- Planning and Business Analysis, Rahimafrooz BD Ltd.) |

Very helpful conversation

mahmood mubarak
Title: manager
Company: BTC
(manager, BTC) |

Under IFRS? All expensed unless your R&D leads to intangible assets under IAS 38.

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