Accounting for Nonmonetary Exchanges

Question 1

What are the 2 groups that US GAAP requires that exchanges of nonmonetary assets be categorized in?

Answer 1

Have commercial substance and lack commercial substance

Question 2

What causes an exchange to have commercial substance?

Answer 2

If the future cash flows change as a result of the transaction

Question 3

What approach is used for a commercial substance?

Answer 3

Fair value approach

Question 4

Under IFRS , does exchanges of similar assets generate revenue and gains?

Answer 4

No

Question 5

If the exchange lacks commercial substance and no boot is received, is a gain recognized?

Answer 5

No

Question 6

If the exchange lacks commercial substance and boot is paid, is there a gain recognized?

Answer 6

No

Question 7

If the exchange lacks commercial substance and the boot received is less than 25% of the total consideration received, is gain recognized?

Answer 7

Yes, a proportional amount, ratio is total boot received/the total consideration received, and then the proportion of the total gain is recognized

Question 8

If the exchange lacks commercial substance and boot received is greater than 25%, is a gain recognized?

Answer 8

Yes, gains and losses are recognized in the entirety

Question 9

If a loss is suffered in a transaction lacking commercial substance, should the loss be recognized?

Answer 9

Yes

Question 10

What situations do not recognize gain when a transaction lacks commercial substance?

Answer 10

Lacks commercial substance, boot paid, and no boot received

Question 11

Whenever a nonmonetary asset is involuntarily converted to cash, is a gain or loss recognized?

Answer 11

Yes, in its entirety