How are convertible preferred shares initially measured?

Convertible preferred shares are initially measured at the fair value of the cash or assets received. This approach aligns with accounting standards that dictate that financial instruments should be recorded at fair value upon issuance. The fair value measurement reflects the amount that a company receives from investors in exchange for the shares, which includes any equity value that the convertible feature may add. This method ensures that the company recognizes the true economic value that has been received, rather than simply relying on nominal or market conditions that may not accurately represent the transaction's actual economic implications.

This initial measurement at fair value is crucial as it establishes the basis for subsequent accounting for the equity instruments, ensuring transparent and consistent reporting in the financial statements. The other options do not correctly reflect the valuation principles under applicable accounting standards, focusing instead on aspects that do not apply to the initial measurement of convertible preferred shares.