Accounting for Exchange of Property, plant and equipment
By Nicholas Ee Herng Wai FCCA, C.A.(M) Under IAS 16 Property, plant and equipment, the cost of an item of property, plant and equipment acquired by way of exchange is measured at the fair value of the asset given up unless: the exchange transaction lacks commercial substance; or the fair value of the asset received and asset given up cannot be reliably measured. In this case, the acquired item is measured at the carrying amount of the asset given up. This means that the cost or fair value of the item received is not relevant. The asset received will be measured either at the fair value or the carrying amount of the asset given up. An exchange transaction has commercial substance if the risk, timing and amount of the cash flows…