Non-momentary Exchanges

Question 1

In any exchange, all realized losses are fully recognized in accordance with the principle of

Answer 1

conservatism. Of course, theoretically, such losses should have already been recognized as part of the impairment process.

Question 2

For nonmonetary exchanges that contain commercial substance, meaning that the amount and timing of future cash flows changes as a result of this exchange,

Answer 2

gains and losses are recognized immediately.

Question 3

When a transaction involving a nonmonetary exchange lacks commercial substance, the reported amount of the nonmonetary asset

Answer 3

surrendered is used to record the newly acquired asset. If the transaction has commercial substance, the fair value approach is used.