Question

In 2009, the FASB changed the reporting for out-of-pocket costs of outside merger and acquisition advisory services. This change, as compared with previous GAAP. True or False?

Answer 1

The FASB changed the reporting requirements for merger and acquisition advisory service costs in 2009, requiring companies to expense these costs as incurred rather than capitalizing them, impacting reported earnings during the period of the M&A activity.

Step-by-step explanation:

In 2009, the Financial Accounting Standards Board (FASB) did indeed change the reporting requirements for out-of-pocket costs related to merger and acquisition (M&A) advisory services. This change required companies to expense these costs as incurred, which was a shift from the prior practice of capitalizing such costs as part of the investment in the acquired entity under previous Generally Accepted Accounting Principles (GAAP). The implication of this change was to reduce the reported earnings in the period in which the M&A activity occurred, potentially affecting the analysis of a company's financial performance by stakeholders.