Question

Dinga Corp. exchanged similar pieces of equipment with Elongo Corp. No cash was exchanged. Since this exchange will not significantly change the economic position of either company, this transaction lacks commercial substance. At this time, the net book value of Dinga's asset is $36,000, while the net book value of Elongo’s asset on their books is $33,300. However, it has been reliably determined that the fair value of Dinga’s asset is $36,900, while the fair value of Elongo’s asset is $34,200. Given these facts, at what amount should Dinga record the asset it receives from Elongo?

$36,000

$33,300

$36,900

$34,200

Answer 1

Answer. $36, 000

As per IFRS standard Property plant and equipment, where property plant and equipment are acquired in exchange for non monetary asset the cost of such an PPE is measured at Fair value unless:

The transaction lacks commercial substance

Or

Fair value of assets received and assets given up is not measured reliably.

And if the asset that is acquired is not measured at fair value then it's cost is to be measured at the carrying amont of asset that is given up.

This in above question the transaction lacks commercial substance. The cost of asset received is measured at carrying amount of asset given up

= $36, 000

If any doubt please comment