Nonmonetary Exchange

1. Under U.S. GAAP, nonmonetary exchanges are divided into two categories: exchanges of assets that have commercial substance and exchanges of assets that lack commercial substance. An exchange has commercial substance if future cash flows of the entity involved in the exchange change as a result of the transaction. Gains and losses are always recognized in exchanges having commercial substances and are not normally recognized in exchanges lacking commercial substance (in exchanges lacking commercial substances, there might be an impairment loss which is recognized before or as part of the transaction). The exchange of goods or services between entities for which no monetary instruments are involved. (Also called barter.)