Nonmonetary Exchange
Barron's Accounting Dictionary:
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Nonmonetary Exchange
Method of handling an exchange between one business entity and another that results in the acquisition of assets or services or the satisfaction of liabilities by surrendering cash assets (boot) or services or issuing other obligations. If the transaction has commercial substance, all gains and losses are recognized.
If the nonmonetary transaction lacks commercial substance, then none of the gain is recognized but all of the loss is recognized. If boot is received and the amount of boot is less than 25% of the fair market value of the asset, then a partial gain is recognized. The gain recognized equals the total potential gain times the ratio of the boot to the total fair market value of the assets plus the boot. If the boot received is equal to or more than 25%, the boot is ignored and the full gain or loss is recognized.
If the nonmonetary transaction lacks commercial substance, then none of the gain is recognized but all of the loss is recognized. If boot is received and the amount of boot is less than 25% of the fair market value of the asset, then a partial gain is recognized. The gain recognized equals the total potential gain times the ratio of the boot to the total fair market value of the assets plus the boot. If the boot received is equal to or more than 25%, the boot is ignored and the full gain or loss is recognized.
| Nonlinearity, Noninterest-Bearing Note, Nondeductible Tax | |
| Nonmonetary Item, Nonparametric Statistics, Nonproductive Capacity |
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Barron's Accounting Dictionary
Dictionary of Accounting Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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