Nonmonetary Exchanges

Question 1

commercial substance

Answer 1

any change in cash flows

gain/loss recognized

Question 2

lack commercial substance

Answer 2

no change in cash flows
FV cannot be determined

loss ALWAYS recognized
gain depends on boot received

Question 3

fair value approach

Answer 3

used if exchange has commercial substance

= FV - BV

Question 4

calculation of acquired asset

Answer 4

= FV of asset given up

+ cash paid

Question 5

non-monetary exchanges

GAAP vs IFRS

Answer 5

GAAP
commercial substance: gain/loss recognized
lack of commercial substance: loss ALWAYS recognized/gain depends on cash received

IFRS
exchanges of dissimilar assets: same as exchange w/ commercial substance under GAAP

exchanges of similar assets: NOT an exchange that generate revenue; no gains recognized

Question 6

no boot received

lack of comm substance

Answer 6

no gain recognized

Question 7

boot is paid

lack of comm substance

Answer 7

no gain recognized

Question 8

boot received < 25%

lack of comm substance

Answer 8

recognize proportional gain

= (total boot received / total consideration received) x total gain

Question 9

boot received >= 25%

lack of comm substance

Answer 9

considered monetary exchange

recognize gain/loss in entirety for both transactions

Question 10

total consideration received

Answer 10

FV of asset given up

Question 11

involuntary conversions

Answer 11

i.e. fire loss, theft, condemnation

gain/loss recognized