![]() ![]() In addition, a TCA helps manage the tax risks associated with the transaction and the allocation of transaction costs by applying and documenting the necessary due diligence in determining the proper tax treatment of transaction costs. Performing a Transaction Cost Analysis (a TCA) can generate significant tax savings opportunities by identifying certain costs and expenses that may be deductible currently, or over time. These fees and expenses can have a major after-tax impact on the final cost of a transaction. Mergers, acquisitions and divestitures are major financial transactions that involve numerous and significant costs and expenses along the way. Maximize Hidden Deductions Related to Transaction Costs Estimates and cost allocations should be reviewed at the end of each financial reporting period as discussed in ASC 970-340-35-1.Primary Contacts: Evan C. As the scope of a project is expanded and the period of development extended, a reporting entity’s ability to estimate future costs to complete becomes more critical. This would require a relative fair value allocation to the east and west sides for purposes of determining the east side qualifying asset amount. If, however, each side was considered a separate project and "activities," as defined by ASC 835-20-20, were only underway on the east side, the west side would not be considered a qualifying asset. If the entire development is defined as a single project, both the east and west sides would be, assuming they met the requirements, qualifying assets for purposes of interest capitalization. The developer may plan to begin construction on the east side and move to the west side when the east has been substantially sold out. For example, a planned residential community may be geographically divided in half by a highway. The guidance in ASC 970-360-20 should be considered when determining the distinguishable portions of a real estate project or phase. The determination of the amount of costs to be capitalized (e.g., interest, property taxes) and the allocation of common costs (e.g., roads, infrastructure development) is in part dependent on how projects or phases within a development are defined. A later sale of the amenity at more or less than its estimated fair value as of the date of substantial physical completion, less any accumulated depreciation, results in a gain or loss that shall be included in net income in the period in which the sale occurs. For the purpose of determining the amount to be capitalized as common costs, the amount of cost previously allocated to the amenity shall not be revised after the amenity is substantially completed and available for use. If an amenity is to be sold separately or retained by the developer, capitalizable costs of the amenity in excess of its estimated fair value as of the expected date of its substantial physical completion shall be allocated as common costs.The common costs include expected future operating costs to be borne by the developer until they are assumed by buyers of units in a project. If an amenity is to be sold or transferred in connection with the sale of individual units, costs in excess of anticipated proceeds shall be allocated as common costs because the amenity is clearly associated with the development and sale of the project.Transfers and servicing of financial assetsĪccounting for costs of amenities shall be based on management's plans for the amenities in accordance with the following: Revenue from contracts with customers (ASC 606) ![]() Loans and investments (post ASU 2016-13 and ASC 326) Investments in debt and equity securities (pre ASU 2016-13) Insurance contracts for insurance entities (pre ASU 2018-12) Insurance contracts for insurance entities (post ASU 2018-12) IFRS and US GAAP: Similarities and differences ![]() Business combinations and noncontrolling interestsĮquity method investments and joint ventures ![]()
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