Non-Commercial Swap: What Is It?
Companies tend to do non-commercial swap regularly, as do individuals when they need to renew their assets from time to time for various reasons.
What Is A Trade-In?
According to article 1538 of the Civil Code, swaps are a contract by which each contracting party is obliged to give one thing to receive another. In all companies, acquisitions of assets, specifically fixed assets, are usually carried out through asset swaps. Purchase out of our balance sheet is exchanged for another that we wish to add to our balance sheet. The problem arises since, usually, the price of the assets is different. Our 2007 NPGC allows and regulates asset swaps when other non-monetary assets are received for the outgoing investment or a combination of monetary and non-monetary assets.
Trade swaps occur when there is an exchange of assets with a notable difference in their nature, whether for non-monetary or monetary support.
In this case, the asset or well-received will be valued at the fair value of the sound delivered, increasing, if applicable, any monetary support that had been agreed in exchange, unless there is more significant evidence of the item’s fair value received—having the latter as a limit. In a difference in value, the profit and loss account will be kept. Finally, if the fair value cannot be known, the item received will be valued at the book value of the asset delivered plus the monetary aid provided, if applicable.
Non-Commercial Swap And Example
The exchanged assets have the same characteristics, and there are no significant differences between the acquisition received and the support delivered. Now, to perform the accounting operation correctly, we must consider:
The asset delivered is accounted for at its book value on the exchange date.
The asset received is accounted for at the book value of the support delivered or at its fair value if it is lower, plus the monetary consideration if this is the case.
You have to remember that non-commercial ones do not allow you to record profits, although there are losses when the value of the asset received is lower than the book value of the item delivered.
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