Definition of exchange of nonmonetary assets

exchange based on the fair market value of the asset given or that received, whichever is more clearly evident. As a result, a gain or loss on the exchange is recorded because there is commercial substance to the transaction. The gain or loss equals the difference between the book value of the asset given up and the fair market value of the asset received. There is commerical substance when future cash flows change because of the transaction arising from a change in economic positions of the two companies. However, if the exchange lacks commercial substance, we record at book value the asset given up with norecognition or gain of loss.