03-31-2009, 11:44 PM
Dears,
The cost of new machinery is the "amount actually payable to vendor" plus "fair value of the exchanged/traded out asset". Wherever exchange of asset would be made, it will be treated at fair value. The amount actually paid (apart from trading out/exchanging the asset) will be added in the fair value of such traded out/exchanged asset.
This is the key to the solution and has to be kept in mind for every exchange transaction.
In above case, the amount actually paid was 32-18 = 14, while the fair value of traded out asset was 12. Therefore the cost of traded in asset will be equal to the sum of both.
I refer you to study paragraphs 24, 25 and 26 of IAS-16, if you have the IFRS book with you. These paragraphs provide sufficient guideline required to solve your above query.
Please come back if reading of these paragraphs do not serve the purpose.
Please note, I tend to avoid replying PURELY academic queries. However, I am providing you the back ground to understand the impact of professional pronouncement on such transcations.
Regards,
KAMRAN.
The cost of new machinery is the "amount actually payable to vendor" plus "fair value of the exchanged/traded out asset". Wherever exchange of asset would be made, it will be treated at fair value. The amount actually paid (apart from trading out/exchanging the asset) will be added in the fair value of such traded out/exchanged asset.
This is the key to the solution and has to be kept in mind for every exchange transaction.
In above case, the amount actually paid was 32-18 = 14, while the fair value of traded out asset was 12. Therefore the cost of traded in asset will be equal to the sum of both.
I refer you to study paragraphs 24, 25 and 26 of IAS-16, if you have the IFRS book with you. These paragraphs provide sufficient guideline required to solve your above query.
Please come back if reading of these paragraphs do not serve the purpose.
Please note, I tend to avoid replying PURELY academic queries. However, I am providing you the back ground to understand the impact of professional pronouncement on such transcations.
Regards,
KAMRAN.
