Financial Reporting (Ind AS)Question 5823 of 11
All Questions

In a business combination under Ind AS 103, how should acquisition-related transaction costs (e.g., legal fees, due diligence costs) incurred by the acquirer be accounted for?

Options

ACapitalized as part of the cost of acquisition (added to Goodwill/Capital Reserve).
BExpensed in the Statement of Profit and Loss in the period in which the costs are incurred and services received.
CDeducted directly from retained earnings.
DAmortized over a period not exceeding 5 years.
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option B — Expensed in the Statement of Profit and Loss in the period in which the costs are incurred and services received.

All Options:

  • ACapitalized as part of the cost of acquisition (added to Goodwill/Capital Reserve).
  • BExpensed in the Statement of Profit and Loss in the period in which the costs are incurred and services received. ✓
  • CDeducted directly from retained earnings.
  • DAmortized over a period not exceeding 5 years.

Detailed Solution & Explanation

Correct Answer: Option **B** Explanation: According to Paragraph 53 of Ind AS 103, acquisition-related costs are costs the acquirer incurs to effect a business combination. Those costs include finder's fees, advisory, legal, accounting, valuation and other professional fees. The acquirer must account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception: costs to issue debt or equity securities must be recognized in accordance with Ind AS 32 and Ind AS 109.

Key Concepts to Understand

Combination

A selection of objects where order does not matter.

More Questions from Financial Reporting (Ind AS)

Under Ind AS 115 'Revenue from Contracts with Customers', which of the following criteria must be met for an entity to recognize revenue over time?

Under Ind AS 116 'Leases', at the commencement date, how is the lessee's Lease Liability initially measured?

Under Ind AS 109 'Financial Instruments', an investment in equity shares not held for trading can be irrevocably designated at initial recognition to be measured at:

Under Ind AS 36 'Impairment of Assets', an impairment loss is recognized whenever the carrying amount of an asset or cash-generating unit exceeds its:

Which of the following is a key feature of Ind AS?

What is the primary objective of consolidation of financial statements?

Ready to Master Financial Reporting (Ind AS)?

Practice all 11 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free