Question

Identify if the following related party transactions in ASPE would be measured at the exchange amount (EA) or the carrying value (CV). The company sells computer equipment and software.

Answer 1

1. 

EA – computer equipment is normal course of business for the company and the terms and conditions were standard.

 

2. 

CV – sale of land would not be in the normal course of business for the company since they sell computers. There is no substantive change in ownership since the sale was between a subsidiary and a parent.

 

3. 

EA – sale of building would not be in normal course of business. There would be substantive change in ownership since the Board member now owns the land. Since there was an external appraisal there would be objective evidence of the value.

 

4. 

CV - computer equipment is normal course of business for the company but the terms and conditions were not standard since a 20% discount was given and their standard discount was 5%. There would be a substantive change in ownership but since value is not fair value cannot be recorded at exchange amount.

 

5. 

CV - sale of office equipment would not be in normal course of business. There would be substantive change in ownership since the Board member now owns the equipment. But since the value was determine between the two related parties there would not be objective evidence of the value.