Baker Tilly has has warned city law firms they face greater scrutiny on bills because new accounting rules will mean merger and acquisition fees will hit clients’ bottom line directly.

The new regime will push companies to account for deal fees as an expense in the year incurred, rather than ‘capitalised’ costs of an acquisition, which can be spread over many years or deferred as goodwill, Legal Week reports.

Under changes drawn up by the International Accounting Standards Board all deal costs, including legal fees, will be detailed as separate expenses directly impacting the profit and loss accounts. Currently, these fees sit on the balance sheet.

'This will mean directors will want to focus on the headline costs and fees when it comes to how it is presented to the public,' George Bull, the head of Baker Tilly’s professional practices group, said.

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