For whatever reason the becker lecture on this topic was difficult for me to "graspp." This lecture made the topic seem easy and now I am hoping for a simulation problem on NMTs for my exam monday!
Farhat in my Becker study material, they tell me that when cash/boot is paid in a nonmonetary transaction that lacks commercial substance, you still need to see if it is less than or greater than 25%. In your lecture, you state that no matter what, if cash is paid, we defer the gain. So I am confused as to which method to use. In your example, Becker tells me we would record all of the gain. Heres the math: Cash of $420,000 ----------------------------------------------------- = 77% Cash 420k + FV of old Asset 120k Because this is 25%, we record all of the gain New Equipment. 540,000 Old Equipment 500,000 A/D 400,000 Cash 420,000 Gain 20,000 So you see, it makes a huge difference. Becker is telling me one thing, but your lecture is telling me another. Please let me know what you think
You are correct, if the ratio is greater than 25% either cash received or paid, then you treat the transaction as monetary transaction and would recognize the assets exchanged at fair value. -- How did you do on FAR?
Was wondering the exact same thing. Becker says if boot paid is less than 25% then we defer it like farhat mentions. However, if boot paid is more than 25% we treat it as a monetary exchange and record the gain. Would also like clarification because this is conflicting information.
I am studying the topic Non monetary exchange from Keiso's Intermediate accounting IFRS edition. I cleared my basic from this video. From that book solved some math and it didn't recognise the gain and loss at all and deferred both the gain and loss when the transaction lacks commercial substance. Is it okay to not recognise the gain?
As others have pointed out, the information in this lecture does not accurately reflect how these nonmonetary exchanges are tested on the CPA exam (i.e., the 25% rule for cash, etc.) Still an excellent lecture, but viewers be advised: do not use this material if you are studying for FAR. It will only jumble what's already in your head.
I agree with Miguel and now I am confused about which methodology I should memorize. Professor Farhat, would you advise and thank you for the great lectures!!!
If you want to reassure yourself of what the correct methodology is then I would suggest looking at 845-10-25-6 in the codification. If the monetary consideration (boot) is significant then you treat it as an exchange with commercial substance. So you would recognize ALL of the gain.
For whatever reason the becker lecture on this topic was difficult for me to "graspp." This lecture made the topic seem easy and now I am hoping for a simulation problem on NMTs for my exam monday!
Hi Jack, most welcome. Please check my FAR Becker supplemental course: farhatlectures.com/cpa_exams/far/far-gleim-2/becker-supplemental-course/
Farhat in my Becker study material, they tell me that when cash/boot is paid in a nonmonetary transaction that lacks commercial substance, you still need to see if it is less than or greater than 25%. In your lecture, you state that no matter what, if cash is paid, we defer the gain. So I am confused as to which method to use. In your example, Becker tells me we would record all of the gain. Heres the math:
Cash of $420,000
----------------------------------------------------- = 77%
Cash 420k + FV of old Asset 120k
Because this is 25%, we record all of the gain
New Equipment. 540,000
Old Equipment 500,000
A/D 400,000
Cash 420,000
Gain 20,000
So you see, it makes a huge difference. Becker is telling me one thing, but your lecture is telling me another. Please let me know what you think
In Wiley notes, Everything matches with Farhat's Lecture.
You are correct, if the ratio is greater than 25% either cash received or paid, then you treat the transaction as monetary transaction and would recognize the assets exchanged at fair value.
--
How did you do on FAR?
Was wondering the exact same thing. Becker says if boot paid is less than 25% then we defer it like farhat mentions. However, if boot paid is more than 25% we treat it as a monetary exchange and record the gain. Would also like clarification because this is conflicting information.
I'm confused with same question. I use Becker as well. Who can give us the correct answer? thanks in advance.
Thanks for the lecture.
Does this apply for IAS 16? (IFRS)
I am studying the topic Non monetary exchange from Keiso's Intermediate accounting IFRS edition. I cleared my basic from this video. From that book solved some math and it didn't recognise the gain and loss at all and deferred both the gain and loss when the transaction lacks commercial substance. Is it okay to not recognise the gain?
As others have pointed out, the information in this lecture does not accurately reflect how these nonmonetary exchanges are tested on the CPA exam (i.e., the 25% rule for cash, etc.)
Still an excellent lecture, but viewers be advised: do not use this material if you are studying for FAR. It will only jumble what's already in your head.
Thanks sir..so easy to understand. Bless you sir
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Company alpha exchange is equipment fair value old equipment is 19000 book value 14000 alpha also paid 4000 cash
Record entry for exchange assuming the exchange has commercial substanc?
2:23
I agree with Miguel and now I am confused about which methodology I should memorize. Professor Farhat, would you advise and thank you for the great lectures!!!
Try a third source and judge yourself.
If you want to reassure yourself of what the correct methodology is then I would suggest looking at 845-10-25-6 in the codification. If the monetary consideration (boot) is significant then you treat it as an exchange with commercial substance. So you would recognize ALL of the gain.
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