FAR Non monetary Transactions

Question 1

how do you recognize a gain/Loss in non-monetary exchange transactions?
Comparing FV and BV of asset acquired

Answer 1

LOSS
1. A Loss is recognized immediately

GAIN.
1. If the gain has commercial substance (ie future CF is going to change as a result of this transaction), RECOGNIZE ENTIRE GAIN

2. No commercial substance:
   a. Cash involved? No: NO GAIN RECOGNIZED
   b. No cash received, but you paid Cash: NO GAIN
   RECOGNIZED
   c. Cash received? Yes.
   i. <25% of total consideration: Recognize
   proportional gain
   ii. >25% of total consideration: BOTH sides
   will recognize entire gain (bc it is
   considered commercial substance)

Question 2

How to measure a non-monetray transaction that has commercial substance (monetary exchanges)

Answer 2

The FV of assets given up is ASSUMED to be equal to the FV of assets received, including any cash given or received in the transaction.

Question 3

Difference between IFRS and US GAAP on non-monetary transactions

Answer 3

Under IFRS, nonmonetary exchanges are characterized as exchanges of similar assets and exchanges of dissimilar assets. Exchanges of dissimilar assets are regarded as exchanges that generate revenue and are accounted for in the same manner as exchanges having commercial substance under USGAAP. Exchanges with similar assets are not regarded as exchanges that generate revenue, and no gains are recognized.