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Hi sir,
Here is my doubtOn 1 jan 2008 zeeper co purchased 40000 $1 listed equity shares at a price of $3 per share. An irrevocable election was made to recognise the shares at fair value through OCI. Transaction cost were 3000$ .At year end of 31 dec 2008 the shares were trading at 6$ per share.
Here ans is 240000
I don’t understand why they didn’t include transaction cost I mean my ans what I did is here.
1) financial asset
2)OCI so we will add transaction costSo (40000+3000) *6= 258000 but I don’t understand the answer they did 40000*6 =240000
Why they didn’t add 3000.?.. can you please explain me. Thank you in advance sir.Hi,
You are asked for the value at the reporting date, which is the number of shares owned multiplied by the price at the reporting date. The transaction costs are dealt with at the acquisition date and will have already been accounted for.
Thanls
Hi,
You account for the transaction costs at the date of acquisition, so would have added the 3,000 to the 120,000 (40,000 x 3) to give 123,000.
The value at the reporting date is now at 240,000 (40,000 x 6), which is shown on the SFP. The movement from 123,000 to 240,000 goes through OCI.
Thanks
Hello sir,
I have a confusion for transaction cost, when to include in transaction cost and when to take as an expense?
Thank you
Regards
Hi,
Transaction costs are expensed when we acquire a financial asset that is held at fair value through profit or loss. For any other classification of a financial asset (FVTOCI or amortised cost), the transaction cost is added to the fair value of the asset acquired.
Thanks
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