Question

According to the acquisition method of accounting for business combinations, costs paid to attorneys and accountants for services in arranging a merger should be___________.

Answer 1

Answer:

"charged to profit or loss"

Explanation:

According to the acquisition method, acquisition-related (transaction) costs are costs the acquirer incurs to effect a business combination. For example, the cost of the advisory, legal, accounting, valuation or consultancy fees, must not be included in the cost of the acquisition. These costs must be treated as an expense as incurred and written off to profit or loss.

The amount of transaction costs associated with an acquisition and written off during the period to profit or loss must be disclosed in a note to the financial statements.

So based on the above discussion the answer to the question shall be "charged to profit or loss"