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can you explain me the treatment of transaction costs when dealing with financial assets like debt and investment? when do we capitalize this? if we don’t capitalize this then do we have to show this as expense in PnL? Also how do i treat this when dealing with liabilities and equity?
Summary :
Amortized Cost (FA / FL) Increase C.A / Decrease CA
FVPL (FA-FL) ExpenseLearn it as exception:
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FA-FVPL (gains/losses classified through OCI) – Increase C.A
====================================Anyone Verify it please.
Thanks Meaow01. Anas, there’s a good article in Student Accountant by Tom Clendon (towards the end of last year, from memory) read that – it sets out clearly the “rules”
“When Debt seems equity?”
Read it.
Well, It will really appreciated if you can verify the above,as i am going in exams after learning the above summarized approach.
No, here’s the link for the first of two articles by Tom Clendon:
Within that article, TC clearly tells you about the treatment of transaction costs
thanks mike
so to summarize:
we deduct TC if we issue bonds or loan notes (we deduct from opening bal)
if it is an asset we add but if its an equity instrument we expensed it (only situation we dont expense it but add to the equity instrument is where we are taking equity through OCI)
Is that correct
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