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Are acquisition/transaction costs capitalized or expensed?

For book purposes, US GAAP requires a company to expense transaction costs in the period incurred. Under tax purposes, a company may be allowed to capitalize transaction costs and amortize over the useful life of the asset or a determined period.

Examples of acquisitions costs include fees to 3rd party legal, accounting, and tax firms. What can be capitalized is any fees to register or issue debt or equity securities.

For example, if Simba Ventures incurred $30,000 to issue debt securities, $25,000 to register debt securities, $10,000 of legal fees, and $1,000 of due diligence fees, then $55,000 could be capitalized while $11,000 would be expensed in the period incurred.


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