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On 1 January 20X8 a company purchased 40,000 $1 listed equity shares at a price of $3 per share. An irrevocable election was made to recognise the shares at fair value through other comprehensive income. Transaction costs were $3,000. At the year end of 31 December 20X8 the shares were trading at $6 per share.
What amount in respect of these shares will be shown under ‘investments in equity instruments’ in the statement of financial position as at 31 December 20X8?1. The answer is $243,000.
2. My issue is that why transaction costs has been included in the calculation?
-I know that there is fair value through comprehensive income and we should include those transaction costs. However does that mean, for later measurement we should also include those transaction costs? What’s the logic?If the transaction costs are not written off in the year of acquisition, the debit entry representing those costs must be being treated as an asset – as part of the cost of the financial instrument
And they’re included in that amount until the instrument is sold or expires or is written off as worthless
OK?
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