In a business combination where a subsidiary retains its incorporation and which is accounted for under the acquisition method, how should stock issuance costs and direct combination costs be treated?
A) Stock issuance costs and direct combination costs are expensed as incurred.
B) Direct combination costs are ignored, and the stock issuance costs result in a reduction to additional paid-in capital.
C) Direct combination costs are expensed as incurred and stock issuance costs result in a reduction to additional paid-in capital.
D) Both are treated as part of the acquisition consideration transferred.
E) Both reduce additional paid-in capital.

Question

Quizplus · Accepted Answer

Direct combination costs are expensed as incurred, while stock issuance costs reduce additional paid-in capital according to the acquisition method.

In a Business Combination Where a Subsidiary Retains Its Incorporation