Explore BrainMass
Share

Explore BrainMass

    When are gains on similar asset exchanges deferred?

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    On the issue of exchange (trade-in) of old asset for a new one, pre-FASB153's rule was based on exchange of similar and dissimilar assets, where gains on similar trade-ins are deferred (if cash was paid), much like how they are treated for taxes. FASB153 (implemented as a part of the harmonization effort with international standards) changed that. Does anyone recall from your reading what is the key criteria used to evaluate these transactions in order to determine whether a gain (losses are always recognized in these transactions) should be recorded?

    © BrainMass Inc. brainmass.com October 10, 2019, 7:10 am ad1c9bdddf
    https://brainmass.com/business/accounting/gains-similar-asset-exchanges-deferred-570323

    Solution Preview

    While there is no special "key criteria" for losses, there is for gains. Any exchange of similar assets must have a "Commercial" purpose. If the exchange of similar assets has no commercial purpose (not part of a profit-seeking activity), the gains must be deferred! This keeps businesses ...

    Solution Summary

    Your discussion is 155 words and two references and indicates the key criteria.

    $2.19