Let us see, How IFRS 13 Defined The Transport Costs. Transport costs are defined in Appendix A of IFRS 13 as ” The costs that would be incurred to transport an asset from its current location to its principal (or most advantageous) market.”
Both transaction and transport costs have an effect on the determination of the fair value of an asset or liability. When determining the principal (or most advantageous) market where an asset may be sold, the level of transaction costs will be considered. In common, lower transaction costs will designate a more advantageous market. The determination of the most advantageous market will then affect the measurement of the fair value. However, the price used to measure the fair value of an asset or liability will not be adjusted for these costs. The ground for this is that these costs are not considered to be a characteristic of the asset or liability. Instead they are specific to a transaction and will change from transaction to transaction.
An asset may have to be transported from its current location to the principal (or most advantageous) market. As the location of an asset or a liability is a characteristic of the asset or liability, it will have a different fair value because of linked transport costs. For example, if an entity located in a capital city is considering buying a vehicle, then a vehicle located in a country town has a different fair value compared to one located in the capital city because of the transport costs linked with the vehicle in the country town. In contrast, transaction costs such as registration costs are not a characteristic of the asset. A price in the principal (or most advantageous) market is then adjusted for the transport costs.I will show in later part how transport costs and transaction costs are used in the measurement of fair value.