5.5 Fair Value Option
ASC 825-10
25-3 Upfront costs and fees related
to items for which the fair value option is elected shall be
recognized in earnings as incurred and not deferred.
ASC 820-10
35-9B The price in the principal
(or most advantageous) market used to measure the fair value
of the asset or liability shall not be adjusted for
transaction costs. Transaction costs shall be accounted for
in accordance with other Topics. Transaction costs are not a
characteristic of an asset or a liability; rather, they are
specific to a transaction and will differ depending on how a
reporting entity enters into a transaction for the asset or
liability.
If an entity elects the fair value option in ASC 815-15 (see
Section 8.5.6) or
ASC 825-10 (see Section
4.4) for an item, it must recognize any up-front costs and fees in
earnings as incurred. This requirement is consistent with the guidance in ASC
820-10-35-9B, which indicates that transaction costs are not part of a fair value
measurement. As a result of the requirement to expense rather than defer up-front
costs and fees associated with accounting for debt at fair value by using the fair
value option, the reported amount of interest expense, if separately reported, will
differ from the amount that would be reported if the same liability is accounted for
by using the interest method.