Commercial and Non Commercial Substance Flashcards
Non Commercial Substance(NCS) when is Gain recognized
If a gain is evident and Cash RECEIVED <25% then recognize the gain in proportion to the cash received and new asset is at FV minus the unrecognized portion of gain.
If Gain is evident and cash RECEIVED is >25% the recognize asset at FV and recognize full gain
when is loss recognized in NCS /CS
Always .new asset is at FV
When is is gain recognized in NCS
only when CASH is RECEIVED and amount depends on whether greater or less than 25%
Rule for gain or loss in NCS when FV is not determinable
Record asset at BV +cash paid or - cash received and no Gainor loss is recognized
Rule if gain is evident and cash is paid
Gain is not recognized and asset is valued at FV +cash paid
Exchange of Non Monetary assets having commercial substance is recorded at
Fair Value of asset surrendered /relinquished as per ASC 845
as per ASC 845 if the cash flows of the two assets are not significantly different, the transaction lacks commercial substance at what value is the asset recorded
Book value +cash paid or -cash received
How should a transfer of a nonmonetary asset in a nonreciprocal transfer be recorded.
A transfer of a nonmonetary asset in a nonreciprocal transfer should be recorded at the fair value of the asset transferred, with a gain or loss recognized on the disposition, whether the transfer is made to a stockholder or to another entity.
when nonmonetary assets are exchanged with no monetary consideration involved and when the cash flows are not significantly different,, how is it recognized.
when nonmonetary assets are exchanged with no monetary consideration involved, no gain is recognized if the transaction lacks commercial substance. When the cash flows are not significantly different, the transaction is deemed to lack commercial substance. Therefore, the accounting for such an exchange must be based on the recorded amount of the asset relinquished (ASC Topic 845).
