06-20-2006, 06:40 PM
So i got it
If an asset is acquired in exchange for another (non monetory/monetory&non monetary) asset/assets (whether similar or dissimilar in nature)16.24
The cost will be measured at the fair value (of the asset received, except if F.V of asset given up is more clearly evident then F.V of asset received F.V of asset given up) if
a. the exchange transaction has commercial substance 16.25 or
b. the fair value of either the asset received or the asset given up(or both) is reliably measurable16.26
The cost will be measured at the carrying amount of the asset given up if
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
Exchange transaction
An exchange transaction has commercial substance if
a. the configuration (risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred; or
e.g cash inflow from disposal of old asset is RS 1000 & Cash outflow due to acquisition of new asset is Rs500,this exchange transaction has commercial substance
b. the entity-specific value of the portion of the entityâs operations affected by the transaction changes as a result of the exchange; and
e.g present value of expected cash inflows from use and disposal of old asset was RS 800 & now the present value of expected cash inflows from new asset acquired is RS 900
thus entity specific value of entity's operation chnage by RS.100 due to this transaction,thus this exchange transaction has commercial substance
c. The difference in (a) or (b) is significant relative to the fair value of the assets exchanged.
e.g fair value of asset given up is RS800 & asset acquired is RS 900 & the difference in (A)i.e RS500(1000-500) & The difference in (b)i.e Rs 100
is significant relative to the fair value of the assets exchanged,thus this exchange transaction has commercial substance
DO confirm my illustrations,this is what i have concluded..M I right?
However, entity-specific value of the portion of the entityâs operations affected by the transaction shall reflect post-tax cash flows
one more thing all these conditions must be met for an exchange transaction to have commercial substance.isn't it?
The fair value of an asset for which comparable market transactions do not exist is reliably measurable if 16.26
(a) the variability in the range of reasonable fair value estimates is not significant for that asset or
(b) the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value.
what is meant by clause b
Fair value
F.V of
a. Land & building----determined from market based evidence by appraisal16.32
b. Property,plant&equipment----is market value determined by appraisal
means for land & buliding we need to have market based evidence BUT not for Property,plant&equipment & what is meant by appraisal
However, where no market based evidence of F.V; entity may need to estimate F.V using
an income or depreciated replacement cost approach16.33
what is income or dereciated replacement cost approach?
If an asset is acquired in exchange for another (non monetory/monetory&non monetary) asset/assets (whether similar or dissimilar in nature)16.24
The cost will be measured at the fair value (of the asset received, except if F.V of asset given up is more clearly evident then F.V of asset received F.V of asset given up) if
a. the exchange transaction has commercial substance 16.25 or
b. the fair value of either the asset received or the asset given up(or both) is reliably measurable16.26
The cost will be measured at the carrying amount of the asset given up if
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
Exchange transaction
An exchange transaction has commercial substance if
a. the configuration (risk, timing and amount) of the cash flows of the asset received differs from the configuration of the cash flows of the asset transferred; or
e.g cash inflow from disposal of old asset is RS 1000 & Cash outflow due to acquisition of new asset is Rs500,this exchange transaction has commercial substance
b. the entity-specific value of the portion of the entityâs operations affected by the transaction changes as a result of the exchange; and
e.g present value of expected cash inflows from use and disposal of old asset was RS 800 & now the present value of expected cash inflows from new asset acquired is RS 900
thus entity specific value of entity's operation chnage by RS.100 due to this transaction,thus this exchange transaction has commercial substance
c. The difference in (a) or (b) is significant relative to the fair value of the assets exchanged.
e.g fair value of asset given up is RS800 & asset acquired is RS 900 & the difference in (A)i.e RS500(1000-500) & The difference in (b)i.e Rs 100
is significant relative to the fair value of the assets exchanged,thus this exchange transaction has commercial substance
DO confirm my illustrations,this is what i have concluded..M I right?
However, entity-specific value of the portion of the entityâs operations affected by the transaction shall reflect post-tax cash flows
one more thing all these conditions must be met for an exchange transaction to have commercial substance.isn't it?
The fair value of an asset for which comparable market transactions do not exist is reliably measurable if 16.26
(a) the variability in the range of reasonable fair value estimates is not significant for that asset or
(b) the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value.
what is meant by clause b
Fair value
F.V of
a. Land & building----determined from market based evidence by appraisal16.32
b. Property,plant&equipment----is market value determined by appraisal
means for land & buliding we need to have market based evidence BUT not for Property,plant&equipment & what is meant by appraisal
However, where no market based evidence of F.V; entity may need to estimate F.V using
an income or depreciated replacement cost approach16.33
what is income or dereciated replacement cost approach?
