I.

Issuance of share capital in acquiring PPE

a. Order
i. FV of property received
ii. FV of share capital
iii. Par value of share capital
b. Example (20,000 shares par value of 50. FV of land is 1,600,000 and FV per
share is 90)
II. Issuance of bonds payable in acquiring PPE
a. Order
i. FV of bonds payable
ii. FV of asset received
iii. Face value of bonds
III. Exchange
a. PAS 16.24: the cost of an item of PPE acquired in exchange for a nonmonetary
asset or a combination of monetary and nonmonetary asset is measured at FV,
unless the exchange transaction lacks commercial substance or the FV of neither
the asset received nor the asset given up is reliably measurable.
b. Commercial substance: an event or transaction causing the cash flow of the entity
to change by reason of the exchange. An exchange has commercial substance
when:
i. Cash flows of the asset received and given up differ significantly (main
criteria)
c. Exchange with no cash involved (with commercial substance)
i. Order
1. FV of property given
2. FV of property received
3. CA of property given
ii. Illustration (Investment in equity security with carrying amount of
500,000 is exchanged for an equipment with a FV of 550,000. Investment
has a FV of 530,000)
1. Think of it as a two-way transaction: you sell your asset first to
buy the next asset
d. Exchange with cash involved (with commercial substance)
i. FV of asset given + cash payment (for the payor)
ii. FV of asset given cash payment (for the payee)
iii. Illustration
Aye Bee
Equipment 1,600,000 2,000,000
Acc. dep. 900,000 1,350,000
CA 700,000 650,000
FV 600,000 800,000
Cash paid by Aye to 200,000 200,000
Bee

e. Exchange (no commercial substance)

i. Measured at the carrying amount of the asset given up
 ii. No G/L is recognized when the exchange lacks commercial substance
iii. Cash is still accounted for (+ to carrying amount if payor and from
carrying amount if payee)
iv.
Yee Zee
Equipment 800,000 1,000,000
Acc. dep. 380,000 400,000
CA 420,000 600,000
FV 450,000 500,000
Cash paid by Yee to 50,000 50,000
Zee

f. Trade-in
i. More of an AFAR topic (if you see a problem like this on the prelims,
treat is as an exchange)
ii. Def: property is acquired by exchanging another property as part payment
and the balance payable in cash or any other form of payment in
accordance with agreed terms
iii. Involves a nondealer acquiring the asset from a dealer. It usually involves
a significant amount of cash
iv. order
1. FV of asset given up plus cash
2. T-in value of asset given up plus cash (aka the FV or the asset
received)