Under IFRS, how are acquisition-related costs treated?

Under IFRS, acquisition-related costs must be expensed to profit or loss as incurred. This treatment is guided by the IFRS 3 standard, which outlines accounting for business combinations. When a company acquires another entity, it incurs various costs, such as legal and advisory fees, that are directly attributable to the acquisition process. IFRS requires these costs to be recognized in the period they are incurred rather than being capitalized as part of the acquisition cost.

This approach ensures that the financial statements accurately reflect the expenses associated with the acquisition in the correct reporting period. The expensing of acquisition-related costs helps to maintain consistency and predictability in financial reporting by avoiding the distortion of the fair value of the acquired net assets with irrelevant expenses.

In summary, the requirement under IFRS to expense acquisition-related costs plays a crucial role in presenting a true and fair view of a company's financial performance and position during the acquisition period.