Treatment of transaction costs

Treatment of transaction costs

How are the transaction costs treated?

Transaction costs incurred while acquiring a financial asset or incurring a financial liability is treated differently depending upon the classification of such financial asset or financial liability.

Transaction costs include fees and commission paid to agents (including employees acting as selling agents), advisers, brokers and dealers, levies by regulatory agencies and security exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs.

For financial assets not measured at fair value through profit or loss, transaction costs are added to the fair value at initial recognition. For financial liabilities, transaction costs are deducted from the fair value at initial recognition. For financial instruments that are measured at amortised cost, transaction costs are subsequently included in the calculation of amortised cost using the effective interest method and, in effect, amortised through profit or loss over the life of the instrument.

For financial instruments that are measured at fair value through other comprehensive income transaction costs are recognised in other comprehensive income as part of a change in fair value at the next re-measurement. If the financial asset is measured, those transaction costs are amortised to profit or loss using the effective interest method and, in effect, amortised through profit or loss over the life of the instrument.

Ind AS Accounting Standards

Effective Rate of Interest – EIR

What is SPPI test?

Are RBI circulars relevant for ECL computation as per Ind AS 109?

What is a Financial instrument?

Is there a choice to designate as FVTPL?

What are treasury shares and how are these presented

Contract to deal in non-financial item

Can a corporate entity still follow settlement date accounting?

What does Interest represent?

Gains and losses on assets measured at FVOCI

Separately accounting for an embedded derivative

Derecognition of a financial asset

Foreign currency risk in a firm commitment as a fair value hedge

Derecognise financial assets/financial liabilities retrospectively

Modification of contractual cash flows

Own use exemption as per the Accounting Standard

Difference between amortised cost & held-to-maturity

Accounting treatment for FVOCI Instruments

What is the concept of effective interest method?

What is a hybrid contract?

First-time adoption while classifying a financial instrument

SPPI test & business model objective test

Current standards for financial instruments as per AS?

Effective interest Rate

Contract is settled through the entity’s own equity instrument

Financial asset categorised as FVOCI

What is an embedded derivative?

Impairment model for different categories of financial assets

Ind ASs relating to financial instruments

FVOCI (equity instruments) and FVOCI (debt instruments)

Classification of derivative instruments

Contract meant for own use

Reclassification of a financial asset

Debt instrument measured at FVOCI

Change in contractual cash flows

Loss allowance as per Ind AS 109

Ind AS for financial instruments replica of IFRS?

Contractual cash flows & effective interest rate

Long-term financial liability classified as FVTPL

Credit adjusted effective interest rate

Effective rate of interest during the first-time adoption

Consequence of not de-recognising an asset after the sale

Designation of contracts deal a non-financial item on first time adoption

Recognition of financial instruments on first-time adoption

Gains and losses on a financial instrument

Gains and losses from liabilities designated as FVTPL

Measurement categories for financial assets

Difference between time value of money and modified time value of money