A deal has been made with a local mining company to acquire 5 used motor vehicles no longer required by the mining company in exchange for a hover 3000 extraction system which has a market value of £75,000. As this was not for cash and the machine had cost £50,000 to manufacture I am not sure how this should be accounted for under the requirements of IAS 16
Exchanging Assests with one another
- Thread starter msd123
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bklynboy
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Paragraph 24 discusses non monetary exchanges and requires that “if an asset is acquired in exchange for another asset (whether similar or dissimilar in nature), the cost will be measured at the fair value unless (a) the exchange transaction lacks commercial substance or (b) the fair value of neither the asset received nor the asset given up is reliably measurable. If the acquired item is not measured at fair value, its cost is measured at the carrying amount of the asset given up”.
Generally this will mean FV must be used unless you meet the other criteria. Since you state the extraction equipment has a FV of 75, that is what you would use as the sale amount. Difference between that and the BV of motor vehicles given up is your gain or loss.
Generally this will mean FV must be used unless you meet the other criteria. Since you state the extraction equipment has a FV of 75, that is what you would use as the sale amount. Difference between that and the BV of motor vehicles given up is your gain or loss.