[Carolina]

I have searched “far” and wide for some definitive advice on how to handle these tricky bastards. Every source I have seen handles them differently or has different rules. I feel like I’m taking crazy pills. Can someone please help me, for the love of pete?

Please and thank you.

Nothing to report here.

[Nbmorty]

You just have to know the rules and the rest is a simple asset sale entry but (except cash, you debit another asset).. Thats it.
First of all you have to calculate your g/l (fv or the sale price ought to be greater than the carrying value in ur books)

Then who is paying? did u paid? (in that case no gain whatsoever-unless we are above 25%) or you are the one receiving cash (in that case divide the cash received by the total fv exchanged).. Don't bother which fv (given or received)
at the end the received fv plus cash will be equal to the fv of the given asset. Since they suppose to be arms length transactions, nobody would have a free lunch.
if you received cash, use whatever ratio u got (as long as its below 25%) and multiply it by the gain you calculated earlier.. Use JEs to plug whatever number you miss, usually it would be the new asset.. Easy peasy

The tricky questions might be associated whit:
1) the fact that the ratio of cash paid/received is more than 25%, in that case its a monetary transaction (like a normal sale).

2) the fact that you wouldn't be told the catchphrases like (significant changes in c/fs or in operating results) then you should check the pervious ratio
if its below 25% its still a non-monetary transaction if above its a monetary one (normal sale).

3) in case they used this topic with cashflows you must disclose this transaction (in full fv of the asset received not just cash proceedes) in the non monetary section of c/f statement (regardless of the method used to prepare the statement).

4) in some cases even if they met the criteria of 25% or above it Would Still be considered a non monetary transaction, like if a traveling agency and a fashion store exchanged (swapped) trips for clothes (to facilitate or promote sales to one another ).. like Book this trip and get an outfit as a gift from certain brand or vice-versa.
This qualifies for an exception coz its done merely to facilitate sales of both (unrelated) parties the agency and the retailer (of course there is an effect on c/fs, but since its operational its okay, remeber that most of the non monitory transactions is basically a non cash investing out/in flow) the exchange of goods/services between retailers is an operating one, hence the exception.

At the end don't worry you will not face a complete sim on such trivial topic, max. They could do is a mcq.
Or a single line/row/entry in more broad assets acquisition/disposal sim, with all other (normal) rules.

So don't (that what's Pete said) roll ur wheels too much on it..
Hope this helps

[thisismyname]

This flowchart below helped me understand how it worked. You'll see that losses are ALWAYS recognized, whether it has commercial substance or not. For transactions with NO commercial substance, gains are only recorded when a substantial amount of cash (25%) is involved, because only then is it considered to be a realization of the gain.

AUD - NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training

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[thisismyname]

Ok, not sure if the IMG tag worked, so here's the link to the flowchart below:

Nonmonetary Exchanges

AUD - NINJA in Training
BEC - NINJA in Training
FAR - NINJA in Training
REG - NINJA in Training

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[Carolina]

@Thisisnmyname: Thank you! When computing the fair value of the asset given up, do you also include the amount of cash, if any, paid? Another thing that confuses me is what to do when you don't have all the information about the assets exchanged. For instance, what do you when you're told only what you expect to receive? And when you have information re: the assets given AND received, which fair values do you use to compute? In some examples they use the BV of the assets given and in others they use the FV of the assets received. I usually do journal entries to help me solve, but I have trouble deciding which numbers to plug in.

Thanks again!

Nothing to report here.

[monikernc]

All of his videos are older now but I depended heavily on them while in school and studying for exams. Many of the standards have not changed so check him out. He will walk you through all of it! He has now passed away but I will never forget the value his efforts added to my studies.

AUD - 93
BEC - 82
FAR - 76
REG - 88

How have you been?
Ninja book and MCQs and the forum, all first try! 2016
Licensed State of Montana April Fool’s Day 2020
State of Colorado June 2020 - AICPA Ethics 93
Experience was the worst part of the journey for me. You?
If you want things to change you have to do something different.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Author]

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