Principal market

The principal market is the market with the greatest volume and level of activity for the asset or liability. It is not automatically the market with the highest asset price or lowest liability-transfer price.

Confirm the market and the entity's access

ASC 820-10-35-5A does not require an exhaustive search of every possible market. The entity must consider reasonably available information. If evidence shows a principal market, use that market even when another accessible market could produce a more favorable net amount. If no principal market exists, the analysis moves to the most advantageous market under the applicable guidance.

ASC 820-10-35-6A requires the entity to have access to the selected market at the measurement date. Another company can reach a different market because its activities, location, relationships, or legal access differ.

Keep transaction costs and transport costs separate

ASC 820-10-35-9B states that transaction costs do not adjust the fair value price because they are not a characteristic of the asset or liability. The entity accounts for them under other guidance. Transport costs can affect the price when location is a characteristic of the asset. Record both cost types separately before deciding how either one enters the analysis.