Commercial substance

cost
gain/loss recognition

depends on commercial substance or no commercial substance

if assets exchanged (objects) are different in terms of risk, timing or amount of cash flows OR the value of the entity’s operations significantly changes as a result of the transaction (better off or worse off)

Fair value method- value of asset acquired = the fair value of the asset given up (ie old asset)

Steps:
derecognize (remove BV of old) asset given up
recognize the FV of asset received in exchange (which is costed as the FV of Old Asset - ie asset given up)
record the difference as gain/loss

Fair value calculated with no cash paid/received = FV of Old Asset (ie asset given up unless FV of new is more reliable)

Fair value calculated with cash paid/received:
New asset = FV of old asset minus cash received. Therefore gain/loss= FV of Old + Cash Received - Book value

New asset = FV of old asset plus cash paid. Therefore gain/loss= FV of old - cash paid - book value

Book value method- value of asset received is equal to the book value of the asset given up
Steps:
Derecognize (remove BV) asset given up
recognize the BV of asset received in exchange. BV of asset given up = value of asset received
no gain is recorded; an impairment loss can be recorded if the FV of asset acquired is < BV of asset given up

fair value calculated with no cash paid/received = book value old
fair value Calc. With cash paid/received =
new asset= book value old - cash received or
new asset = book value old + cash paid
therefore no gain.

Fair value determinable with cash paid/received and fair value cap.
Book value cannot be > fair value, therefore record at fair value with impairment loss

Living animals or plants

The harvested product of a biological asset.
raw milk, fruit

Is separating the produce from the biological asset or ending its life

Are the result of processing after harvest- products taken at initial harvest and done something with.
ie. raw milk to cheese

Recognized only when:
the company controls the asset as a result of past events
it is probable that future economic benefits will flow to the entity
assets fair value can be measured reliably

At fair value less costs to sell at each reporting period

At time of harvest only
measured at fair value less costs to sell- becomes cost used for inventory valuation

licensing fees
variable consideration
non refundable payments
delayed payments
non cash consideration
interest and dividend revenue