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Section 3230: Nonmonetary Asset Exchanges

[U.S. GAAP Codification Topic]
845 Nonmonetary transactions
845-10 Overall

[U.S. GAAP before the Codification]
ARB 43, June 1953, Chapter 9, Depreciation
APB 29, May 1973 Accounting for Nonmonetary Transactions
SFAS 153, December 2004, Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29
SFAS 143, June 2001, Accounting for Asset Retirement Obligations

1. Basic Principle
(A) Fair value of nonmonetary asset "received"
(B) Fair value of nonmonetary asset "surrendered"
(C) Book value of nonmonetary asset "surrendered"

(1) Exchange of Nonmonetary Assets
--> Cost of nonmonetary asset received is (B)
--> Recognize gain or loss on the exchange

(2) If (A) is more evident than (B)
--> use (A) as the cost of the asset acquired

2. Cases of Nonreciprocal Transfers
(1) When an asset is transferred, in a nonreciprocal transfer
--> Transfer is recorded at (B)
--> Recognize gain or loss on the exchange

(2) When an asset is received, in a nonreciprocal transfer
--> There is no asset surrendered
--> Cost of nonmonetary asset received is (A)

3. Basic Principles Modified
If the transaction lacks "commercial substance"
--> Cost of nonmonetary asset received is (C)
--> Gain or loss on the exchange is not recognized

4. Commercial Substance
(1) The exchange has "commercial substance"
--> if there is a significant change in future cash flows
--> after the exchange

(2) Significant change in future cash flows
(2a) Significant change in the "configuration" of cash flows
--> configuration: amount, timing, risk
(2b) Entity-specific values of assets received and surrendered
--> are significantly different

5. Boot: Monetary Consideration
If the amount of "monetary consideration" included is
--> 25% or more of the fair value of exchange
--> then, the exchange is considered as a "monetary exchange"

6. If the amount of "monetary consideration" < 25% of fair value of exchange
(1) The party that pays "monetary consideration"
--> No gain is recognized

(2) The party that receives "monetary consideration"
--> Recognized gain = total gain x ratio
--> ratio = (a) / (b)
(a) = amount of monetary consideration
(b) = value of total consideration received

7. Recognition of Loss
"Loss on the exchange"
--> is recognized in full amount

Index of U.S. GAAP Financial Reporting Guide

U.S. GAAP by Codification Topics 
 105  GAAP Hierarchy 
 105  GAAP History 

 205  Presentation of Financial Statements 
 205-20 Discontinued Operations 
 210  Balance Sheet 
 210-20 Offsetting 
 220  Comprehensive Income 
 225  Income Statement 
 225-20 Extraordinary and Unusual Items 
 230  Statement of Cash Flows 
 250  Accounting Changes and Error Corrections 
 260  Earnings per Share 
 270  Interim Reporting
 310  Impairment of a Loan
 320  Investment Securities 
 320  Other-Than-Temporary Impairments, FSP FAS 115-2 
 320-10-05 Overview of Investments in Other Entities 
 320-10-35 Reclassification of Investments in Securities
 323-10 Equity Method Investments
 323-30 Investments in Partnerships and Joint Ventures 
 325-20 Cost Method Investments 
 330  Inventory

 340-20 Capitalized Advertising Costs 
 350-20 Goodwill 
 350-30 Intangibles Other than Goodwill 
 350-40 Internal-Use Software 
 350-50 Website Development Costs 
 360  Property, Plant and Equipment
 360-20 Real Estate Sales

 410  Asset Retirement and Environmental Obligations 
 420  Exit or Disposal Cost Obligations 
 450  Contingencies 
 450-20 Loss Contingencies 
 450-30 Gain Contingencies
 480  Redeemable Financial Instruments 

 505-20 Stock Dividends, Stock Splits 
 505-30 Treasury Stock 

 605  SEC Staff Accounting Bulletin, Topic 13 
 605-25 Revenue Recognition - Multiple Element Arrangements 
 715-30 Defined Benefit Plans - Pension
 718  Share-Based Payment 
 730  Research and Development 
 730-20 Research and Development Arrangements 

 805  Business Combinations  
 810  Consolidation 
 810  Noncontrolling Interests 
 810  Consolidation of Variable Interest Entities, SFAS 167 
 815  Derivatives and Hedging Overview 

 820  Fair Value Measurements  
 820  Fair value when the markets are not active, FSP FAS 157-4
 825  Fair Value Option 

 830  Foreign Currency Matters 
 830-20 Foreign Currency Transactions 
 830-30 Translation of Financial Statements 
 835  Interest 
 835-20 Capitalization of Interest 
 835-30 Imputation of Interest 

 840  Leases 
 840-20 Operating Leases 
 840-30 Capital Leases 
 840-40 Sale-Leaseback Transactions
 845  Nonmonetary Transactions 

 855  Subsequent Events 
 860-20 Sale of Financial Assets, SFAS 166 
 860-50 Servicing Assets and Liabilities, SFAS 156 

 985-20 Costs of software to be sold  

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