Transaction costs

Learning objectives

• Calculate a fair value without adjusting the market price for transaction costs, and distinguish the net amount used to select the market.L2

Normative references

• IFRS 13 §25The price in the principal (or most advantageous) market is not adjusted for transaction costs, which are accounted for under the Standard applicable to the item and are not a characteristic of the asset or liability.

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

11 questions

• Tolvane sells a lot of wheat; there is no principal market. Market A: price {price_a}, transaction costs {transaction_a}, transport costs {transport_a}. Market B: price {price_b}, transaction costs {transaction_b}, transport costs {transport_b}. Compute the net amount of each market, then the net amount of the most advantageous market.L2
• Rovelle trades steel plates; there is no principal market. Market A: price {price_a}, transaction costs {transaction_a}, transport costs {transport_a}. Market B: price {price_b}, transaction costs {transaction_b}, transport costs {transport_b}. Compute the net amount of each market, then that of the most advantageous market.L2
• For a lot of copper with no principal market, Estrelle compares two markets. A: price 600, transaction costs 18, transport costs 12. B: price 610, transaction costs 30, transport costs 24. The location of the lot is a characteristic of the lot (case data). What is the fair value of the lot?L2
• To obtain the fair value of an asset, the price in the principal market is reduced by the transaction costs the entity would bear in selling it.L2
• Why is the market price not reduced by transaction costs to set fair value?L2
• The principal market for a lot of Maréval securities shows a price of {market_price}. By selling it, Maréval would bear {transaction_costs} of transaction costs. Compute the fair value of the lot and the net proceeds Maréval would receive.L2
• An industrial press of Norvaux is quoted at {market_price} in its principal market. Selling it would involve transaction costs of {transaction_costs}. Determine the fair value of the press and the net proceeds of sale.L2
• Which statements about transaction and transport costs are correct? (Several answers.)L2
• Quérande's natural gas is stored at a remote site; location is a characteristic of the asset (case data). The market price is {market_price}; delivery to the market would cost {transport_costs} and transaction costs would be {transaction_costs}. Compute the fair value.L2
• Pélerande's silver ingots are held in a remote vault; their location is a characteristic of the asset (case data). Market price: {market_price}. Transport costs to the market: {transport_costs}. Transaction costs: {transaction_costs}. Compute the fair value.L2
• For an impairment test, the fair value of a unit, determined under IFRS 13 in its principal market, is {fair_value}. Costs of disposal not already recognised as liabilities (legal fees and transaction duties of the planned sale) amount to {costs_of_disposal}. Compute fair value less costs of disposal.L3