Accounting for Non-Monetary Exchanges

Question 1

What are the the two groups of accounting for non monetary exchange?

Answer 1

• Have “Commercial Substance”

- Lack of “ Commercial Substance”

Question 2

when the exchange has commercial substance?

Answer 2

when any of the parties change their economic position as a result of the transaction.
That change can be in the areas of:
    risk
    timing
    amount of cash flows

Question 3

What is the journal entry of a non monetary exchange? with commercial substance

Answer 3

New Asset
Cash Receive
Loss(if Any)
Accumulated Depreciation of asset given up
    Old asset at historical cost
    Cash Given
    Gain(If Any)

Question 4

When we recognize a gain and loss and how is the calculation?with commercial substance

Answer 4

-when the transaction have commercial substance
-Calculation:
FV - ( Historical Cost - Accumulated Depreciation) = Gain/Loss

Question 5

Important assumption of the fair value approach in the exchange for non monetary?with commercial substance

Answer 5

-we assume that the FV of assets given up is equal to the fair value of assets received.

Question 6

Under IFRS how is treated if no exist commercial substance?

Answer 6

is not recognize

Question 7

If the exchange transaction are not expected to change significantly?

Answer 7

-Then the exchange lacks of commercial substance.

Question 8

Is the exchange that have a lack of commercial substance have a loss?

Answer 8

the loss is recognize immediately

Question 9

Is the exchange that have a lack of commercial substance have a gain? options

Answer 9

Four Options:
1-No Boot = No Gain is recognize
2-Boot is Paid <25% = no gain
3-Boot is receive <25% = recognize partial gain in proportion with the boot receive
4- Boot is 25% or more = complete gain is recognize

Question 10

calculation for a journal entry when have a lack of commercial substance have a gain but no boot is paid?

Answer 10

Fair value - deferred gain

Question 11

calculation the total gain when Boot is paid?

Answer 11

(FV of asset given + Boot paid) - (BV asset given + boot paid)= gain (not recognize because the lack of commercial substance and boot is paid)

Question 12

Formula when the boot receive is less than 25% ?

Answer 12

step 1- calculate gain
step 2- proportion of boot receive boot receive/(boot receive+FV of asset receive)
step 3- calculate the proportion of the gain boot receive/(boot receive+FV of asset receive) X gain
step 4- subtract the proportion from the gain and the substrate the gain not recognize from the FV of asset receive (plug)

Question 13

when the non monetary asset is involuntarily converted how is treated?

Answer 13

the entire gain or loss is recognize

Question 14

journal entry for involuntary conversions?

Answer 14

Cash
Asset
Gain on involuntary gain

Question 15

when the transaction have commercial substance , what fair value is used?

Answer 15

the transaction is accounted for using the fair value of the asset surrendered or received, whichever is more evident.