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Hello,
“Although transaction costs are taken into account when identifying the most advantageous market, the fair value is calculated before adjustment for transaction costs because these costs are characteristics of the transaction and not the asset or liability.”‘
Could you please explain what does this mean?
Should we take transaction cost when calculating the FV?Thanks
IMPORTANT POINT
Share price 100
Transaction cost 3Fair value = 100
We aren’t actu;ally selling it at the SFP date, so transaction cost is not relevant for the valuation.
LESS IMPORTANT POINT
(If there are several markets – e.g. US, China – you are supposed to consider transaction costs when making a decision about which market, BUT YOU STILL IGNORE THEM IN THE FINAL VALUATION).
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