What must be deducted from equity when dealing with acquisition-related costs?

When dealing with acquisition-related costs, the costs of issuing equity must be deducted from equity. This principle exists because, under accounting standards like IFRS 9 and IAS 32, any costs directly attributable to the issuance of equity are treated as a reduction of the proceeds from that equity issuance. This means that instead of being recorded as an expense in the income statement, these costs are deducted from the equity section of the balance sheet, specifically from the share premium account (if applicable) or the equity account itself.

Other expenses such as professional fees for audits, employee training costs, or legal fees for property acquisitions are typically classified as period costs and are expensed immediately in the income statement or capitalized as part of the acquisition depending on their nature. They do not directly reduce equity in the way issuance costs do. This distinction is crucial in understanding how acquisition-related costs impact financial statements and reporting.