Hey everyone! I hope everyone's studying is going well today. I was hoping I could get some help on a question from you guys. Here it is:
In an exchange of dissimilar assets under IFRS, an entity received equipment with a fair value equal to the carrying value of the other assets given up. The entity also paid cash. As a result of this exchange, the entity recognized:
a. A loss determined by the proportion of cash paid to the total transaction value
b. Neither a gain nor loss
c. A loss equal to the amount of cash paid
d. A gain determined by the proportion of cash paid to the total transaction value
Okay, so I understand an exchange of dissimilar assets under IFRS is treated exactly the same as if the exchange had commercial substance under GAAP. I thought that the answer was B, however it is C.
I'm perplexed because I thought that when you PAY cash in an exchange that has commercial substance, the cash paid increases the basis of the new asset you are receiving. That is what Becker says, at least.
FAR - 85
AUD - 99
REG - 85
BEC - 10/4/13 (Waiting)
Using Becker Self-Study
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