How should the transaction costs of issuing shares in an acquisition be recognized?
A)Expensed
B)Capitalized as part of the cost of the shares
C)Deducted in total from shareholders' equity
D)Deducted from shareholders' equity, net of related income tax benefits

Question

Quizplus · Accepted Answer

The transaction costs of issuing shares in an acquisition should be deducted from shareholders' equity, net of related income tax benefits. This is in accordance with generally accepted accounting principles (GAAP) and ensures that the net amount of equity received by the company from the issuance of shares is accurately reflected on the balance sheet. The costs should be netted against any related income tax benefits to reflect the true economic impact of the transaction costs on the company.

How Should the Transaction Costs of Issuing Shares in an Acquisition