Asked by Jeremy Dyzenhaus on May 21, 2024
Verified
To prevent abuses when accounting for nonmonetary asset exchanges,U.S.GAAP requires companies to record certain exchanges of nonmonetary assets at the existing book value of the relinquished assets.
Nonmonetary Asset Exchanges
Nonmonetary Asset Exchanges involve transactions where companies trade assets other than cash, such as property, plant, and equipment, without involving monetary payments.
U.S. GAAP
United States Generally Accepted Accounting Principles, a set of accounting rules used for financial reporting.
Book Value
The net value of a company's assets found on its balance sheet, often compared to its market value.
- Familiarize oneself with the situations prompting organizations to list nonmonetary assets at their recorded cost or current market value.
Verified Answer
RA
Rania AssafMay 22, 2024
Final Answer :
True
Explanation :
This statement is true. U.S.GAAP requires companies to record certain exchanges of nonmonetary assets at the existing book value of the relinquished assets in order to prevent abuses when accounting for such exchanges. This is known as the "cost principle" and is applied to ensure that companies record the exchange at its historical cost rather than at its current market value or some other valuation.
Learning Objectives
- Familiarize oneself with the situations prompting organizations to list nonmonetary assets at their recorded cost or current market value.