Joined: 29 Dec 2009 Location: United States
Online Status: Offline Posts: 23
Posted: 15 Apr 2010 at 10:26 | IP Logged
gottobecpa,
thanks for the link but still 1 thing is unclear to me....
I know to calculate G/L for exchanges haveing commercial substance,
G/L = FV of asset given up - BV of assert given up...
How is it calculated for exchanges lacking commercial substance. i know the 25%rule but how is total gain calcualted..is it same just cash paid is added to FV & Bv which eventually makes the effect 0.....
Joined: 10 Feb 2010 Location: United States
Online Status: Offline Posts: 262
Posted: 15 Apr 2010 at 10:46 | IP Logged
Basic Principle
(A) Fair value of nonmonetary asset "received" (B) Fair value of nonmonetary asset "surrendered" (C) Book value of nonmonetary asset "surrendered"
1. Exchange of Nonmonetary Assets --> Cost of nonmonetary asset received is (B) --> Recognize gain or loss on the exchange
2. If (A) is more evident than (B) --> use (A) as the cost of the asset acquired
Cases of Nonreciprocal Transfers
1. When an asset is transferred, in a nonreciprocal transfer --> Transfer is recorded at (B) --> Recognize gain or loss on the exchange
2. When an asset is received, in a nonreciprocal transfer --> There is no asset surrendered --> Cost of nonmonetary asset received is (A)
Basic Principles Modified
If the transaction lacks "commercial substance" --> Cost of nonmonetary asset received is (C) --> Gain or loss on the exchange is not recognized
Commercial Substance
1. The exchange has "commercial substance" --> if there is a significant change in future cash flows --> after the exchange
2. Significant change in future cash flows
(1) Significant change in the "configuration" of cash flows --> configuration: amount, timing, risk
(2) Entity-specific values of assets received and surrendered --> are significantly different
Boot: Monetary Consideration If the amount of "monetary consideration" included is --> 25% or more of the fair value of exchange --> then, the exchange is considered as a "monetary exchange"
If the amount of "monetary consideration" < 25% of fair value of exchange
1. The party that pays "monetary consideration" --> No gain is recognized
2. The party that receives "monetary consideration" --> Recognized gain = total gain x ratio --> ratio = (1) / (2) --> (1) = amount of monetary consideration --> (2) = value of total consideration received
Recognition of Loss "Loss on the exchange" --> is recognized in full amount
__________________ 16-April-10-FARE-77!
29-May-10-AUD-81!
7-Aug-10-REG-76!
31-Aug-10-BEC-87 (unbelievable because studied the least for this, 15 days)
You cannot post new topics in this forum You cannot reply to topics in this forum You cannot delete your posts in this forum You cannot edit your posts in this forum You cannot create polls in this forum You cannot vote in polls in this forum
Active Topics 
Memberlist 
Search 
Help
Register 
Login
Topic: Is this correct for Non-monetary Exchange
Topic Closed)
Cases of Nonreciprocal Transfers