NMT-ASPE3831 IAS 16 IFRS 15

Question 1

IFRS does not have a specific section dealing with Non-
monetary transactions. When should IFRS 15 be applied vs.
IAS 16?

Answer 1

• IFRS 15 applies to transactions with customers

i.e. when inventory or services are exchanged for non-monetary consideration

• IAS 16 applies when PP&E is exchanged for non-monetary consideration

Question 2

How are non-monetary transactions accounted for?

Answer 2

ASPE 3831
* Measured at fair value unless any one of the following in
which case carrying value is used:
‒ Exchange lacks commercial substance
‒ Neither fair value of asset given up or received is
reliably measurable
‒ Exchange of inventory for other inventory in same line
of business
‒ Spin off or other form of liquidation

IAS 16 (PP&E)
* Measured at fair value unless any one of the following in which case carrying value is used:
‒ Exchange lacks commercial substance
‒ Neither fair value of asset given up or received is reliably measurable

IFRS 15 (Revenue)
* See Q&A in revenue section on non-cash consideration, which is addressed as part of step 3, determining the transaction price.
* Non-cash consideration is measured at fair value

• If it is not possible to measure the fair value of the non-cash consideration, it must be estimated by using the stand-
  alone selling prices of the goods or services given up.

Question 3

How is commercial substance defined?

Answer 3

ASPE 3831

A transaction has commercial substance if the entity’s future cash flows are expected to change significantly as a result of the transaction, which happens when:

a) the configuration of the future cash flows of the assets differs significantly
or

b) The difference in the entity-specific value of the assets is

significant relative to the fair value of the assets exchanged

IAS 16 (PP&E)
An exchange transaction has
commercial substance if:
a) the configuration (risk, timing and amount) of the cash flows of the assets exchanged differs; or

b) the entity-specific value of the portion of the entity’s operations affected by the transaction changes as a result of the exchange; and

c) the difference in (a) or (b) is significant relative to the fair
value of the assets exchanged.
*(effectively the same as ASPE but with minor wording differences)

Question 4

How are non-monetary transactions that are also
related party transactions accounted for?

Answer 4

ASPE 3831
* In addition to non-monetary criteria, must also apply
related party rules, so in order to record at fair value
transaction must also be:
‒ In normal course of operations OR

‒ Not in normal course of operations but there is
substantive change in ownership AND exchange
amount supported by independent evidence

No specific guidance
* No difference if it is a related party transaction since IFRS
has no specific guidance on recognition of related party
transactions (only addresses disclosure)

Question 5

If a non-monetary transaction is measured at fair value, how should fair value be determined?

Answer 5

ASPE 3831
* More reliably measurable of fair value of asset given up or
received
* If equally reliable then use fair value of what is given up

IFRS 15
* Non-cash consideration is measured at fair value (of what is received)

• If it is not possible to measure the fair value of the non-cash
  consideration, it must be estimated by using the stand-alone selling prices of the goods or services (given up).