On 30 November 20X9 OPQ acquires a financial asset that is classified as Available for Sale. Which of the following describes the value of the…

According to International Accounting Standard (IAS) 39, which established the 'Available for Sale' (AFS) category, financial assets not classified as 'at fair value through profit or loss' must be initially measured at their fair value plus any directly attributable transaction costs. The AFS classification falls under this rule. Therefore, on the date of acquisition, the financial asset is recognised on the statement of financial position at its fair value, which includes the transaction costs incurred to acquire it. This principle is also carried forward in the successor standard, IFRS 9.

A. Fair value excluding transaction costs: This measurement is used for financial assets classified as 'at fair value through profit or loss' (FVTPL), where transaction costs are expensed.

C. Present value including transaction costs: The standard explicitly requires measurement at 'fair value', not 'present value', although the concepts can be related. 'Fair value' is the prescribed term.

D. Present value excluding transaction costs: This is incorrect because the measurement basis is 'fair value', and for AFS assets, transaction costs must be included at initial recognition.

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1. International Accounting Standards Board (IASB). (2005). International Accounting Standard 39: Financial Instruments: Recognition and Measurement. Paragraph 43. "When a financial asset or financial liability is recognised initially

an entity shall measure it at its fair value plus

in the case of a financial asset or financial liability not at fair value through profit or loss

transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability."

2. International Financial Reporting Standards Foundation (IFRSF). (2014). International Financial Reporting Standard 9: Financial Instruments. Paragraph 5.1.1. "…at initial recognition

an entity shall measure a financial asset or financial liability at its fair value plus or minus

in the case of a financial asset or financial liability not at fair value through profit or loss

transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability."

3. PwC. (2023). IFRS 9: Financial instruments - A comprehensive guide. Section 4.2.1

Initial Measurement. "Financial assets and financial liabilities are initially measured at fair value. For items not at FVTPL

transaction costs are also included." This guide reflects the principles of the official standard.