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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › financial liability measurement
Dear sir,
how to incorporate the transaction cost into the initial measurement of financial liability?
let’s say, we incurred $10 transation cost for the financial liability of $100.
Dr. cash(100-10) 90
Cr. FL 90
when repayment, we recognise the difference between FL’s carry amount and cash repaid into profit or loss?
is it correct??
thanks in advance!
Hello Kateker,
I think first of all you need to consider whether liability shall be placed in 1) fair value through profit or loss OR 2) amortized cost
In 1) You can also expense out the T.Cost during initial measurement as in year end, liability will be recorded at fair value which makes no difference in P&L!
In 2) Initial measurement will be at $90. T.Cost would be charged to P&L systematically due to amortization. Hence in the year of repayment liability will be measured at $100
Dr. Liab $100
Cr. Cash $100
Hope this helps.
Looks good to me