On the target balance sheet for software companies, under ASC 606, there is deferred revenue to recognize revenue over time for cash received upfront. This sits in liabilities and sounds like following ASU 2021-08, deferred revenue no longer has to be recognized at fair value at the time of acquisition (as in M&A).
On the flipside, there are deferred contract acquisition costs (i.e., capitalized sales commissions) that are also recognized over time (ASC 340-40) which are excluded from the ASU 2021-08 guidance. This is an asset (since it is a capitalized cost).
For the life of me, I can't find guidance on what happens to these capitalized costs when the target is acquired.
Is it written off? Is it recognized at acquisition-date fair value? Does it continue to be recognized over time (i.e., amortized) based on the original contract terms like deferred revenue following ASU 2021-08?
Any color / sources would be greatly appreciated. Thanks!
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