Transaction costs

Learning objectives

• Treat directly attributable transaction costs as part of the initial cost.L2, L3
• Calculate, from the case data, the amount relating to transaction costs and justify the basis of calculation.L2, L3
• Record the entry relating to transaction costs and state its effect on the financial statements.L2, L3

Normative references

• IAS 40 §20An owned investment property is measured initially at cost, including transaction costs (right-of-use asset: para. 29A, cross-reference to IFRS 16).
• IAS 40 §21Cost of a purchased property: purchase price and any directly attributable expenditure (professional fees for legal services, property transfer taxes and other transaction costs).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• Legal fees directly linked to the acquisition of an investment property are recognised as an expense of the period.L2
• Ivora acquires a warehouse intended for lease for {purchase_price}. It incurs {legal_fees} of legal fees, {transfer_taxes} of property transfer taxes and {survey_fees} of technical survey fees specific to this warehouse, all directly attributable to the acquisition (case data). Calculate the total transaction costs included and the initial cost.L3
• A finance director comments on the initial measurement of an acquired investment property. Which of the statements is incorrect?L3