Transaction not representing the fair value
A financial asset or financial liability should be measured at fair value on initial recognition. What if the transaction does not represent the fair value of the financial asset or financial liability?
If at initial recognition the transaction value is different from the fair value, then the difference between the fair value at initial recognition and the transaction price is recognised as gain or loss immediately. This is so in the case where the transaction occurs in an active market for an identical asset or liability or based on valuation technique derived from observable market data.
In all other cases, at the fair value adjusted to defer the difference between the fair value on initial recognition and the transaction price. Such deferred difference is recognised as a gain or loss to the extent that it arises from a change in a factor that market participants usually take into account while pricing the asset or liability. For an asset that is subsequently measured at amortised cost, the asset is recognised initially at this fair value on the traded date when an entity uses settlement date accounting for such assets.