ACCA FR · Chapter 12 · Question 5 of 13
Ocelot Co paid $150,000 in legal and due diligence fees when acquiring a subsidiary. How should these costs be treated in the consolidated financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Expensed in consolidated profit or loss when incurred
Explanation
IFRS 3 requires acquisition-related costs, such as legal, advisory, valuation and due diligence fees, to be expensed as incurred. They are not part of the consideration transferred and do not affect goodwill. Costs of issuing debt or equity securities are dealt with under IFRS 9 and IAS 32.
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