Non-Monetary Transaction Recognition in Accounting Standards for Private Enterprises (ASPE)
What is an example of a non-monetary transaction that will be recognized at carrying value of the asset given up according to ASPE?
Lori Co. (Lori) follows ASPE.
a) Lori gives up 100 shares in Steve Co. with a fair market value of $20,000 in exchange for a long-term note receivable of $18,000.
b) Lori gives up vacant land with a fair market value of $15,000 in exchange for 150 shares in Mickey Inc. The shares are not publicly traded and therefore, the more reliable measure of fair value is the land.
c) Lori Co. is in the business of selling kitchen appliances. Lori exchanged a refrigerator with a customer for future accounting services.
d) Lori gave up a vehicle with a fair value of $18,000 to a shareholder as payment for a dividend.
Answer:
The option b, where Lori Co. exchanges vacant land for shares in Mickey Inc. where shares do not have a readily determinable fair value, is an example of a non-monetary transaction recognized at the carrying value of the asset given up in accordance with ASPE.
Among the provided options, the situation that exemplifies a non-monetary transaction recognized at the carrying value of the asset given up, following the Accounting Standards for Private Enterprises (ASPE), is:
b) Lori gives up vacant land with a fair market value of $15,000 in exchange for 150 shares in Mickey Inc. The shares are not publicly traded and therefore, the more reliable measure of fair value is the land.This transaction represents a situation where an asset (vacant land) is exchanged for another (shares) where one of the assets (shares) does not have a readily determinable fair value. Thus, the carrying amount of the asset given up (vacant land) is used to recognize the transaction.