Non-Monetary Transaction [IAS 16, IAS 38, IAS 40, SIC-31 and Section 3831]

Non-Monetary Transactions
Last Update: November 16, 2013

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Non monetary transactions are covered under

  • IFRS – IAS 16 (Property, plant and equipment), IAS 38 (Intangible Assets), IAS 40 (Investment Property) and SIC-31(Revenue – Barter transactions involving advertising services); and
  • ASPE – Section 3831 – non-monetary transactions

Determine first whether the entity is a public entity required to use IFRS or private entity opting to use IFRS. Private entities opting to use ASPE should use the ASPE guidance.


Under IFRS (IAS 16)

Measurement

Non-Monetary Exchanges of Advertising (SIC-31 Interpretation)

Revenue from a non-monetary barter transaction involving advertising cannot be measured at the fair value of advertising services received. A seller may recognize revenue at the fair value of advertising services provided by reference to a non-barter transaction that is:

a)    similar to the barter transaction;
b)    occurs often;
c)    represents a predominant number of transactions and amount when compared to all transactions to provide advertising that is similar to the advertising of the barter transaction;
d)    involves cash or other such forms of consideration that has a reliable fair value; and
e)    Does not involve the same counterparty as in the barter transaction.

Other Non-Monetary Exchanges

Non-monetary transactions are measured at the fair value of the asset received unless the fair value of the item given up is more clearly measurable. The entity measures the transaction at fair value unless one of the following conditions is met:

a) the transaction lacks commercial substance – in other words, the items exchanged would provide similar risk and cash flows as before if the transaction lacks commercial substance;
b) the fair value of both the asset given up or asset received is not reliably measurable

The acquired item is measured this way even if the item given up cannot be immediately derecognised.

 

Under ASPE (Section 3831)

Under ASPE, the entity must measure an asset exchanged or transferred in a non-monetary transaction at the more reliably measurable of the fair value of the asset given up or received unless one of the following situations exists:

a)    the transaction lacks commercial substance – in other words, the items exchanged would provide similar risk and cash flows as before if the transaction lacks commercial substance;
b)    the transaction is an exchange of a product held for sale in the normal course of business;
c)    neither fair value of the asset received or exchanged is reliably measurable; or
d)    the transaction is a non-monetary non-recipricle transfer to owners – this is a spin-off or other form of restructuring or liquidation

Gains and Losses are recognized in net income for the period.


Please report errors, omissions or suggestions to technical@ufeblog.com

3 comments

  1. Thanks, this comparative guidance is very helpful.

  2. I am not sure this is accurate. All the information we are given says a non-monetary transaction is first and foremost to be recognized as the fair value of the asset given up not received.

  3. How to recognize an asset held for service is being exchanged for a damaged product as part of the Annual maintenance contract?

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