The story has been underreported everywhere but this is a big deal for lawyers and IBs:
One of the biggest eyebrow-raisers is a requirement that transaction fees related to an acquisition be expensed as incurred and included on the income statement, rather than capitalized and amortized over time on the balance sheet. “Anytime you have something hitting the bottom line, it’s going to lead to more attention,” says David Zagore, a partner with the law firm Squire, Sanders & Dempsey.
While financing costs will continue to be capitalized, fees related to bankers, attorneys, accountants, valuation specialists, and others will be expensed each period as they are incurred—even if incurred before a prospective acquisition is announced publicly. “With significant public transactions, you may see some reordering of activity,” Zagore says. “Companies are not going to want to send a signal to the market. If the market sees a big jump in expenses, it will raise questions: Are they in the middle of a big transaction? Are they selling? Are they buying someone?”
Posted: February 1st, 2008 under Americas, General.
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