Which types of costs are excluded from the business combination accounting?

The correct choice focuses on direct acquisition costs, which are excluded from the accounting for business combinations under generally accepted accounting principles (GAAP). According to accounting standards, costs associated with the acquisition itself—such as legal fees, investment banking fees, and other direct costs of the transaction—are treated as costs of the business combination. However, they are not capitalized as part of the acquisition and thus are expensed in the period in which they are incurred.

In contrast, costs related to labor and operations, employee training, as well as marketing and advertising expenses, are considered normal operational expenses of the ongoing business and are generally included in the income statement for the period in which they are incurred. These expenses do not directly contribute to the acquisition of a business and therefore are not excluded in the same manner as direct acquisition costs.