Non-Monetary Transactions

Question 1

What is a NMT

Answer 1

exchange of non monetary items for other non monetary item

Question 2

How to record the transaction

Answer 2

Either at carrying value or FV of asset given up(aspe)/rec(ifrs)

Criteria to measure at FV:

1. Commercial substance
2. Different in nature
3. FV is reliably measured for either item
4. Reciprocal - both rec something

If all not met =carrying value

Question 3

Differences between the 2 standards

Answer 3

When both FVs available:
ASPE:GIVEN UP
IFRS:RECEIVED

Question 4

Differences between the 2 standards

Answer 4

When both FVs available:
ASPE:GIVEN UP
IFRS:RECEIVED

Question 5

Livingstone Ltd. completed a non-monetary transaction (NMT) that was determined not to have commercial substance. As a result, the transaction will be recorded at carrying value. The asset given up has a carrying value of $8,000. The asset received has a carrying value of $6,500. Livingstone also received $2,000 cash in the transaction. At what value should Livingstone record the asset received?

a)

The asset should be measured at $6,500.

b)

The asset should be measured at $8,000.
Correct Answer
c)

The asset should be measured at $6,000.
Incorrect Response
d)

The asset should be measured at $10,000.

Answer 5

Answer d) is incorrect. This is the carrying value of the asset given up plus the cash received. The asset cannot be recorded at more than the fair value of the asset. When cash is involved in the transaction, the entity receiving the cash measures the non-monetary asset received at the carrying amount of the asset given up less the fair value of the cash received. Answer c) is correct because the correct measurement is $6,000 — the $8,000 carrying value of the asset given up less the $2,000 cash received.

Question 6

Carrying amt valuation

Answer 6

paid cash = carrying amt of item given up + cash

rec cash = carrying amt - cash, if cash more = gain