Hi- we just completed a small acquisition (all cash). It was pretty straight forward. There was no contingent consideration or any unusual terms. There is a TSA agreement. Our auditors are saying we need to assess whether to account for the TSA agreement in the purchase accounting. Since it’s for services performed after the acquisition date, wouldn’t it be accounted for as ongoing expense?
TSA Agreement
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The TSA services should be accounted for at fair value. If the TSA services were performed at below market prices or for free, then a portion of the purchase price should be allocated to the TSA agreement as a prepaid and expensed over the term of the agreement.