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Fair value measurement assumes that the transaction to sell the asset or transfer the liability… when selling the asset does that exclude transaction costs and costs of entering the market?
i.e asset sold for $400, transaction costs are $20 and entering to market is $50. Do we do $400-20-50= $330. so profit in P/L of $330 or $400?Quotes from the examiner’s answer:
“Although transaction costs are taken into account when identifying the most advantageous market, the fair value is not after adjustment for transaction costs because these costs are characteristics of the transaction and not the asset or liability.”and
“If location is a factor, then the market price is adjusted for the costs incurred to transport the asset to that market.”
Fair value (not profit!) would be, from your figures, $400 – $50 = $350
OK?
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