How does UK GAAP treat acquisition related costs compared to IFRS?

Under UK GAAP, acquisition-related costs are typically treated as part of the cost of the investment. This means that when a business acquires another entity, any costs directly attributable to the acquisition, such as legal fees, due diligence costs, and other associated expenses, are capitalized as part of the investment value reported in the financial statements. This treatment contrasts with the IFRS approach, which generally requires such costs to be expensed as incurred rather than capitalized.

The capitalizing of these costs under UK GAAP reflects the idea that they are integral to the acquisition process and should be factored into the overall investment figure, thus impacting the valuation of the acquired entity on the acquiring company's balance sheet. This approach aligns with the matching principle, as it helps to match the costs incurred during an acquisition with the future benefits that are expected to arise from that investment.

Other options may suggest alternative treatments such as expensing costs or excluding them from financial statements, but these do not align with the UK GAAP framework's perspective on treating acquisition-related expenses as part of the capital investment.