[vodrldnr]

the fair value of an asset at initial recognition is
1.the price paid to acquire asset
2the price paid to acquire the asset less transaction cost
3the price paid to transfer or sell the asset
4the book value of the asset acquired

Wiley says answer is 1

but I think it is 3

see this

https://www.fasb.org/summary/stsum157.shtml

Amended definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price)

what is you guys opinion ?

Plus

I always assume that initial recognition is just amount of A/L when it is recognized in F/S at the first time

.. like freshman in University…

can anyone know solid definition about it ????

It ain't About How Hard You Hit

[Anonymous]

Wiley is right. Let's say you buy 50 stocks of ABC for 25 dollars on January 15 (You also can assume that is the current fair market value because I can not imagine someone overpaying or underpaying a stock in an open market). Then you record on the same day in your books the fair market value of 1,250 for those stocks which is also the price that you paid. The action of recording it in your books at the day of purchase, January 15, is called initial recognition.
I think you are going way beyond. You are right that the price gets adjusted at year end (Possibly Dec 31) when drafting the F/S, which changes the FMV to the exit price of December 31, but initial recognition is always the price that you paid which is assumable to be the fair market value at the day of purchase.

[vodrldnr]

@LOO, Hi loo good afternoon haha

than you for checking my post.

so .. do you think mentioning “initial recognition” make big difference ?

from what you say.. my understanding is like

for the initial recognition -> entry price

after initial recognition and when measure the fair value -> more focus on exit price

am I getting it right??

yeah. You are right I am going unnecessarily too deep for this problem

It ain't About How Hard You Hit

[Anonymous]

Haha. Yes, you have to assume its a perfect market because they do not provide any other information (So seller does not sell for a gain on top of the current Fair Market Value); therefore, their exit price is your entry price, so you record it “initially” at entry price in your books, and then adjust it for future exit.

[vodrldnr]

thank you soon much.

my understand about Fair value was all messed up.

thank you for giving me really clear understanding !

I really appreciate your help!!!!!

It ain't About How Hard You Hit

[Author]

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