1. Scope and Core Definition of Financial Instruments
Under IFRS 9 (Financial Instruments) and ASC 321/325/326 (US GAAP), a financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets encompass cash, contractual rights to receive cash or another financial asset, contractual rights to exchange financial instruments under potentially favorable conditions, and equity instruments of another entity.
 
2. Initial Measurement and Transaction Costs
All financial instruments are initially recognized at fair value. The accounting treatment for transaction costs (e.g., brokerage fees, transfer taxes, regulatory levies) depends on the chosen subsequent measurement category: [1]
                            ┌───────────────────────────┐
                            │ Initial Transaction Costs │
                            └─────────────┬─────────────┘
                                          │
                  ┌───────────────────────┴───────────────────────┐
                  ▼                                               ▼
      ┌───────────────────────┐                       ┌───────────────────────┐
      │  FVTPL / Trading Sec. │                       │ Amortized Cost / AFS  │
      └───────────┬───────────┘                       └───────────┬───────────┘
                  │                                               │
         Expense immediately                             Capitalize into the initial
         in Profit or Loss.                              carrying value of the as
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