Related party trans

Question 1

Carrying amount method

Answer 1

Record at book value of transferor.
Diff between book value and cash goes to Contirbuted surplus (up to gains) then R.E

Seller:
DR. Cash (amount paid)
DR Cont surplus then R.E or CR. Cont surplus
CR Asset (book value)

Buyer:
DR. Asset (book value)
DR Cont surplus then R.E or CR. Cont surplus
CR. Cash (amount paid)

Question 2

Exchange amount method

Answer 2

Gain/ loss recorded in NI 
Seller. 
DR. Cash (agreed on p)
DR/CR Loss/ gain on sale
CR. Asset (book value)

Note if exchange is below book value consider impairment.

Buyer:
DR. Asset
CR. Cash
note. Asset cannot be recorded at more than FMV.

Question 3

Non Monetary Transactions

Answer 3

Instead of cash use carrying value of each asset given up.

Use FMV if it is less than the exchange value as Assets cannot be recorded at more than FMV

Question 4

Which method to use? Carrying or exchange?

Answer 4

Use tree on ASPE 3840

Normal course of operations - inventory normal. PPE not.

Change in ownership interest substantive - if the transfer results in 20% or more.

Question 5

IFRS difference

Answer 5

RPT’s treated like normal transactions. ie at exchange amount.

Question 6

ASPE & IFRS

Answer 6

IAS 24

ASPE 3840

Question 7

Where gain is recorded in
Carrying method
vs
Exchange method

Answer 7

Carrying = Equity

Exchange = NI (Normal transaction)