Chapter 2 Accounting for nonmonetary exchanges Flashcards
How is gain or loss recognized on a non-monetary exchange?
A transaction that lacks commercial substance under GAAP is an exception to the general rule of basing the measurement value of exchange on fair value. Because cash is less that 10% of the total consideration, a proportional amount of the gain is recognized.
If an exchange has commercial substance, what value is used to record the exchange? Fair value or carrying value?
Fair value of the asset exchanged.
How is gain and loss calculated on a nonmonetary transaction?
In a nonmonetary transaction that has commercial substance, gains and losses are recognized based on the difference between the fair value and book value of the asset give up.
How are gain and loss accounted for on nonmonetary exchanges that are deemed to have commercial substance?
For nomonetary exchanges that contain commercial substance, meaning that the amount and timing of future cash flows changes as a result of this exchange, gains and losses are recognized immediately.
How is the asset acquired recorded in a nonmonetary exchange that lacks commercial substance?
The reported amount of the nonmonetary asset surrendered is used to record the newly acquired asset.
