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As10 PPE
Accountancy
Can any one explain what is commercial substance and how to treat PPE when acquired by exchange of assets.
Answers (16)
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Thread Starter
Sairam ReddyBro it is my opinion Is I am correct or wrong
Correct but keep in mind which value have to be taken (as discussed earlier)
Commercial substance of asset means there will be future inflow of cash using the asset. In simple, using the asset , the revenue will be generated to the company either directly or indirectly. Exchange of asset accounting : Commercial substance exists: Recognize gains or (loss) on the exchange contemporaneously. No commercial substance, no cash changing hands: Defer gains and recognize losses contemporaneously. No commercial substance and cash received: Recognize gain and loss contemporaneously
Abhishek Purohit
Value PPE either at fair value of the asset given up or asset recieved , whichever is clearly evident
In these both are clearly evident
Abhishek Purohit
FV of asset given up
Is this statement is correct if there is no commercial substance
Thread Starter
Sairam ReddyIs this statement is correct if there is no commercial substance
In that case asset would be valued at book value of the asset given up
Abhishek Purohit
Correct but keep in mind which value have to be taken (as discussed earlier)
Thanks bro for spending your valuable time
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