Direct combination costsalmost all business combinations, Ask an Expert

Accounting

Direct Combination CostsAlmost all business combinations employ professional services to assist in various phases of the transaction. Examples include target identification, due diligence regarding the value of an acquisition, financing, tax planning, and preparation of formal legal documents. Previously, SFAS 141 included direct combination costs in the cost basis for the acquired firm. The acquisition method considers these costs as payments for services received, not part of the fair value exchanged for the business. Thus, direct combination costs are expensed as incurred

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