AFA 717 Lecture Notes - Lecture 10: Deferred Income, Intangible Asset, Issued Shares
• At year end:
• Depreciate the combined value of the asset
• Record interest on the asset obligation
• Represents the increase in the liability due to the passage of time
• Re-measure the obligation for any changes in the timing, risk or amount of future cash flows
• Long-lived assets are often exchanged for other non-monetary assets
• Non-monetary assets do not have a value fixed in terms of dollars
• Non-monetary transactions are any exchange of non-monetary assets, liabilities, or services for
other non-monetary assets, liabilities, or services, or any exchange that has little or no monetary
consideration involved
• Valuation of the acquired asset is the substantive issue in non-monetary asset exchanges
• Valuation alternatives and accounting for non-monetary exchanges of long-lived assets:
• If there is commercial substance to the exchange, then the new asset is recorded based
on fair value
• If there is no commercial substance, or if fair value cannot be determined, then the new
asset is recorded based on the net book value of the asset given up
• When long-lived assets are acquired using shares, this is another non-monetary transaction
• Record at the fair value of the long-lived asset acquired;
• If not reliably measureable, then use fair value of shares issued
• Governments, shareholders, and other parties occasionally donate assets and services to
corporations
• Represents a non-reciprocal transfer
• There is no specific IFRS guidance for donated assets to a corporation
• In not-for-profit organizations – donated assets is common – the following practices are
required:
• Record the asset at fair value, and credit a deferred revenue account
• Depreciate the asset
• Recognize revenue from the deferred revenue account in the same pattern as asset
depreciation
• Elements of cost
• Internally developed intangible assets qualify for capitalization if certain criteria are met
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