Are real estate acquisitions considered business combinations?
Yes, but the definition applies, with some exceptions, to acquisitions of rental commercial or office property with tenants in place, not vacant land or owner-occupied property. Companies are not only purchasing the land and building, but they are purchasing the entire business. As part of the transaction, the buyer obtains control over the real estate and becomes responsible for all of its activities. In that respect, the acquirer’s balance sheet will more accurately capture the fair value of the assets acquired and assumed liabilities as of the acquisition date than it would using a traditional approach. How does FAS 141R impact the treatment of acquisition costs? This is one of the biggest changes under FAS 141R. Direct professional fees related to the acquisition, such as consulting fees or due diligence costs, can no longer be capitalized or used as part of the real estate acquisition cost. Now, those fees must be completely expensed in the period in which they occur. This change
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