F3/M6 Nonmonetary Transactions

Question 1

(T/F): If a transaction has commercial substance, the economic position of each entity changes, it is a monetary transaction, or future cash flows of both parties change, and we recognize a G/L

Answer 1

True

Question 2

(T/F): The cash received in a transaction with commercial substance does not factor into the G/L

Answer 2

True

Question 3

(T/F): Fair value given up = Fair value received

Answer 3

True;
Record the asset received at the total of the 
- Cash paid
- FV of items given up
- Liabilities assumed

Question 4

(T/F): Under IFRS, nonmonetary exchanges for similar assets recognize a G/L

Answer 4

False; nonmonetary exchanges for dissimilar assets recognize a G/L

Question 5

Recognizing Gains and Losses for Exchanges that lack commercial substance

Answer 5

• No Boot Received = No Gain
• Boot is Paid = No Gain (<25% rule)
• Boot is Received = Recognize Proportional Gain (<25% rule)
• • % recognized = (boot received / total consideration received)

Question 6

(T/F): If Boot paid or received is >25% of total consideration, the transaction should be treated as one with commercial substance

Answer 6

True; both sides recognize respective G/L

Question 7

(T/F): If a loss occurs, commercial or non commercial, record the loss

Answer 7

True, rule of conservatism

Question 8

(T/F): Involuntary conversion = entire gain or loss is recognized

Answer 8

True

Question 9

(T/F): In an exchange of non-monetary assets lacking commercial substance and boot is paid, no gain is recognized as long as the boot paid is less than 25% of consideration paid

Answer 9

True