What is the most advantageous market and when does it apply?

Question

AcadiFi · Accepted Answer

The most advantageous market is invoked only when a principal market cannot be identified. It is the market that maximizes the net amount received after deducting transaction costs and transportation costs, computed at the measurement date.

For Halberdry's private bond: Broker X offers $98.50 with $0.75 transaction costs; Broker Y offers $98.80 with $1.20 transaction costs. Net proceeds are $97.75 at X and $97.60 at Y. Broker X is the most advantageous market. Fair value is then reported as $98.50 (the gross price in the most advantageous market), because transaction costs are deducted only to identify the most advantageous market, not to measure fair value itself.

The reporting entity must have access to the selected market at the measurement date. If a specific broker will not transact with Halberdry for regulatory or relationship reasons, that venue is excluded. The analysis is done from the entity's perspective, not market participants generally.

Transaction costs include broker commissions, fees, exchange charges, and taxes directly attributable to the transaction; they exclude transportation costs (which are treated separately because they reflect asset location and are deducted from fair value). For non-financial assets, if transportation is necessary to access the market, fair value is the gross price less transportation. For Halberdry's financial bond, transportation is not relevant.

Reassessment is required each reporting period as market conditions change.

What is the most advantageous market and when does it apply?

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