The FASB's New Rules For Exchanges of Nonmonetary Assets: A Possible Avenue for Earnings Management?
The new FASB standard (SFAS No. 153) on accounting for exchanges of nonmonetary assets fundamentally changes the accounting procedures for these transactions. The previous standard, APBO No. 29, based the accounting for the exchange on whether the assets involved were similar or dissimilar in nature. For assets similar in nature, the general rule was that no gain could be recognized unless other assets were includeed in the exchange. The new standard introduces a subjective determination of the concept of commercial substance. Any exchange where commercial substance exists is accounted for at fair value with gain or loss on the exchange recognized in the current financial statements. This paper examines how this new standard is applied and the possibility of its provisions being used as an earnings management device by companies.
Allied Academies International Conference
Clark, S. J.,
Pate, G. R.
(2006). The FASB's New Rules For Exchanges of Nonmonetary Assets: A Possible Avenue for Earnings Management?. Allied Academies International Conference, 11(1), 5-8.
Available at: https://aquila.usm.edu/fac_pubs/21305