I got confused regarding the exchange of assets. if there is commercial substance, should we be measuring the cost of property acquired at fair value of the asset GIVEN UP?
In Dec 2015 Q1 Bubble Group, Paragraph 4 it was clearly mentioned the fair value of the property acquired, yet from the answer, I can see they are using the fair value of the asset given up?
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Exchange of Assets-Commercial Substance
8y ago#1Hi,
People do get confused but if you think about it as the purchase of an asset with cash and not the exchange of an asset, then it you are giving an asset worth $7 million dollars then is that not what you would pay if you were paying in cash? I think it would. So therefore if it was a cash purchase we would DR PPE $7m CR Bank $7m but here we DR PPE (new) $7m ( as that is what we are effectively paying) CR PPE (old) and any difference is a profit on disposal.
Hope that helps.
Thanks
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