Shark Ltd acquires Nemo Pty Ltd which has two main divisions in manufacturing activities – divisions A and B. A public announcement has been made that Nemo Pty Ltd will restructure the nature and focus of division A’s operation and close and discontinue the activities of division B. Division B will operate for 6 months after the date of acquisition. At the end of the 6 months, a few divisional employees will be retained to finalise closure of the division, but the rest will be retrenched.

Required Which of the following costs, if any, are restructuring costs?

1. The costs of leasing the factory space occupied by division A for the year after the date of acquisition.

2. The costs of modifying the division’s purchasing system to make it consistent with that of the acquirer’s.

3. The costs of hiring an external consultant to develop the new system and distribution networks for division A.

4. The costs of employees (salaries and benefits) to be incurred after operations cease and that are associated with the closing of division B.

5. The costs of employees (salaries and benefits) who are involved in the restructuring activities such as planning and effecting the restructuring activities.

6. The costs of terminating the lease for the factory occupied by division B.