If the fair values of the assets in a nonmonetary exchange cannot be determined, the asset received is valued at the book value of the asset given.
True
Non-monetary exchanges are those transactions where no money is exchanged and the consideration includes goods, or services, or a combination of both. In such exchanges, if the fair values of the assets involved cannot be determined, then the asset received is valued at the book value of the asset given.
Book value refers to the value of an asset as reflected on the company’s balance sheet. It is calculated by deducting the accumulated depreciation or impairment from the original cost of the asset. For example, if a company exchanges a used truck for a new piece of equipment, and the fair value of the used truck cannot be reliably determined, then the new equipment received would be assessed at the book value of the used truck.
This valuation method is used in order to maintain the accuracy of a company’s financial records and to ensure that the value of assets presented in the balance sheet is reliable. It is particularly useful in situations where the fair value of assets cannot be determined due to the lack of suitable market data or other valuation techniques.
However, it is important to note that this valuation method may not necessarily reflect the market value of the assets exchanged, and hence may not always be the most accurate representation of their worth. In such cases, the book value valuation method should be used as a fallback option and other sources of valuation should be explored to obtain a more accurate estimation of the fair value of the assets involved.
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