Nonmonetary Transactions

Question 1

What are types of nonmonetary transactions?

Answer 1

Nonmonetary transactions are nonmonetary exchange with commercial substance or non commercial substance. Lack of commercial substance is when projected cashflows after the exchange are not expected to change significantly.

Question 2

How to record gains or losses for the exchange with commercial substance?

Answer 2

Gains and losses are always recorded when there are commercial substance. Gains and losses = FV - book value of asset given up.

Question 3

How to record gains and losses for exchange with lacks commercial substance exchange?

Answer 3

For Gains:
- No boot received = no gain
- Boot is received = proportional gain (boot/total consideration) (if boot is less than 25% total consideration.
- Boot is paid = no gain (if boot is less than 25% of total consideration)
- Boot is received with > 25%, we recognize gain as FV of asset given - BV of asset given.
For Losses: we recognize gain as FV of asset given - BV of asset given. same with the >25% boot received.