FR - Non Monetary Transaction

Question 1

Explain what a Non-monetary transaction is.

Answer 1

It is an exchange that occurs between parties, including related parties where both item exchanges are NMT in nature
Ex. can exchange unusual property, land and building, inventory

Question 2

How do you account for the NMT?

Answer 2

1. Determine if it is a reciprocal or non-reciprocal exchange of NMT asset
   - NMT is measured at a fair value of the asset given up or received
   - New asset is recorded, old asset is removed from records at carrying value. Gain or loss may result in a difference

Question 3

Provide the transaction accounts for the NMT

Answer 3

Dr. Asset - New
Dr. Accumulated depreciation
Dr./ Cr. Gain or loss on NMT
Cr. Asset - Old

Question 4

What is prohibited under ASPE for NMT

Answer 4

Under ASPE, the measurement of FV is prohibited if any of these are met
1. Transaction lacks commercial substance
2. Transaction is an exchange of product/ property held for sale in the ordinary course of business for a product
3. FV of neither the asset received or given up can be reasonably measured
4. Transaction is a non-monetary, non-reciprocal transfer to the owner that represents a spinoff or other form

Question 5

How is a partial transaction considered?

Answer 5

1. Have to determine the FV measurement - cash can be included as part of the FV of the asset given up or received
2. Carrying value measurement - if the exchange does not meet FV measurement, accounting treatment depends on whether the entity is giving up or receiving cash

Question 6

Explain what a commercial substance is.

Answer 6

The commercial substance has to meet two criteria under ASPE
1. Configuration of future cash flow of the asset received differs simply from the configurator of cash flow given up
2. Entity specific value of the asset received differs significantly from the entity-specific value of the asset given up
- If the exchange is similar, difficult to determine if the configuration of cash flow and assets differs

Question 7

Provide the transaction of a non-commercial substance transaction would be for NMT

Answer 7

Dr. Asset - New xx
Dr. Accumu. Depre. xx
Cr. Asset - Old xx

Question 8

Provide the transaction of a commercial substance transaction would be for NMT

Answer 8

Dr. Asset - New xx
Dr. Accumu. Deprec. xx
Dr. Loss or Cr. Gain on sale of exchange xx
Cr. Asset - Old xx

Question 9

What is determined when there is an exchange of similar items

Answer 9

Under ASPE, this exclusion applies to transactions where two items are exchanged that are similar and would be valued at their carrying value
Ex. A sports clothing store trades an inventory of t-shirts with another sport clothing store for different t-shirt

Question 10

How is fair value reliably measured for a non-monetary transaction

Answer 10

1. Variability in the range of reasonable fair value estimates for assets is not significant
2. Probailities of various estimates within the range can be reasonably assessed and used to estimate FV

Question 11

What is considered if the transaction should be used from its carrying value or fair value for a non-reciprocal transfer to owner

Answer 11

For the non-monetary transaction, it is a spinoff or other form of restructuring/ liquidation - should be measured at carrying value

Question 12

What handbook is used for IFRS and ASPE

Answer 12

ASPE 3831 - Non, monetary transaction
IFRS - various:
IAS 38 - Intangible asset
IFRS 15 - REvenue from Contract
IAS 16 - PPE

Question 13

What is the difference of IFRS and ASPE for NMT

Answer 13

Under IFRS, if the revenue transaction occurs in which the customer promises consideration in a form other than cash, the vendor measures the transaction at FV of non-cash consideration received.

Question 14

What is the disclosure for Non-monetary transactions to be stated on the Financial statement?

Answer 14

1. Nature of the transaction
2. Basis of the measurement and amount
3. Related gain and or loss