ACCOUNTING FOR ACQUISITION‐RELATED COSTS One of the responsibilities of the group accountant for Southland Ltd, Ms Bluff, is to explain to the company’s board of directors the accounting principles applied by the company in preparing the annual report. Having analysed AASB 3/IFRS 3, Ms Bluff is puzzled by the requirement in paragraph 53 that any acquisition‐related costs such as fees for lawyers and valuers should be expensed. Ms Bluff has analysed other accounting standards such as AASB 116/IAS 16 Property, Plant and Equipment and notes that under this standard such costs are capitalised into the cost of any property, plant and equipment acquired. She therefore believes that to expense such costs in accounting for a business combination would not be consistent with accounting for acquisitions of other assets. Further, Ms Bluff believes that to expense such costs would result in a loss being reported in the statement of profit or loss and other comprehensive income in the period the business combination occurs. She is not sure how she will explain to the board of directors that the company makes a loss every time it enters a business combination. She believes the directors will wonder why the company enters into business combinations if immediate losses occur — surely losses indicate that bad decisions have been made by the company. Required Prepare a report for Ms Bluff on how she should explain the accounting for acquisition‐related costs to the board of directors.