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I was trying to understand Nonmonetary Exchanges that is part of the Module 10: Fixed Assets from the Wiley 2011 Textbook.
I came up with the below rules that, as far as I can tell, should cover most cases. Items 1 and 11 below are special cases that may not necessarily comply with the below rules. In addition to the special cases, items 9&10 are not directly covered by the below rules with respect to how the Asset Received is recorded.
Rule 1: FV Treatment Vs Exception to FV Treatment
Use the FV treatment if the exception criteria below is not meet.
Exception Criteria
When using FV treatment:
G/L are recorded and asset received is recorded at FV, hence the term “FV Treatment.”
FV treatment or the lack of such treatment only impacts the decision to record a gain.
Rule 2: Losses are ALWAYS recorded due to conservatism.
It doesn’t matter if Boot is given/received or not involved, commercial substance is lacking or not lacking, and if the FV given is known or unknown. All these items are irrelevant because a loss is always recorded due to conservatism.
Rule 3: Gains are ONLY recorded when…
Rule 4: Asset Received is recorded at FV when either Gains or losses are recorded.
Rules 1 & 2 already discuss when to record gains and losses so this helps incorporate rule 3. When FV Given is known, simply use the formula....
FV given + boot given or subtract boot received.
If FV given is unknown, simply use FV received
Rule 5: Calculating Gains or loss
When FV given is known, simply use the below formula. Boot, whether not included, given or received and FV treatment or exception to are irrelevant factors when calculating G/L .
FV Given – BV Given
When FV Given is unknown, simply substitute the FV Given with the FV received amount in the above formula and add boot received or subtract boot given. So when the FV given is unknown, the base formula is revised as follows:
FV received – BV Given + Boot Received or
FV Received – BV Given – Boot Given
Said differently, when FV Given is unknown take what you receive and subtract what you are giving, which includes boot.
Clarifying the Usage of Boot:
Understanding Rules 3 and 4 helps to clarify but to explicitly clarify this when can summarize the usage of boot. Boot is part of calculations when…
1.) Recording an Asset Given at FV, if the FV Given is known.
2.) When calculating G/L, the FV Given is unknown.
Table: Illustration of Various NonMonetary Situations
Item 
Situation 
Gain or Loss Equals… 
G/L Recorded? 
Asset Received is Recorded…. 
1 
FV not Determinable 
Cannot calculate GL, therefore, N/A 
No G/L recorded 
BV Given 
2 
Loss, No Boot, FV Given is Known 
FV Given  BV Given 
Record Loss 
FV Given 
3 
Loss, No Boot, FV Given is Unknown 
FV Received  BV Given 
Record Loss 
FV Received 
4 
Loss, Boot Given, FV Given known 
Same as 2 
Record Loss 
FV Given + Boot Given 
5 
Loss, Boot Given, FV Given Unknown 
FV Received – (BV Given + Boot Given) 
Record Loss 
Same As 3 
6 
Loss, Boot Received, FV Given is Known 
Same As 2 
Record Loss 
FV Given – Boot Received 
7 
Loss, Boot Received, FV Given is Unknown 
(FV Received + Boot Received) – BV Given 
Record Loss 
Same As 3 
8 
Gain, No Boot, FV Given is Known, Doesn’t meet FV exception criteria 
Same as 2 
Record Gain 
Same As 2 
9 
Gain, No Boot, FV Given is Known, Meets FV Exception Criteria 
Same as 2 
No Gain is recorded 
BV Given 
10 
Gain, Boot Given, FV Given is Unknown, Meets FV Exception Criteria 
Same as 5 
No Gain is recorded 
BV Given + Boot Given 
11 
Gain, Boot Received, FV Given is known, meets FV Exception Criteria, FV of Asset Received is Unknown 
Boot Received / (Boot Received + FV of Asset Received)
Take the above and multiply it by the Gain (FV Given – BV Given)
Calculating FV of Asset Received when FV is Unknown: FV Given – Boot Received

Gain Recorded 
BV Given – Boot Received + Gain Recognized
Or
FV Received – Gain Deferred 
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