Firms sometimes acquire assets by exchanging an asset other than cash or by issuing common stock.In these cases, acquisition cost is
A)the fair value of the asset received, only.
B)the fair value of the consideration given, only.
C)either the fair value of the consideration given or the fair value of the asset received, depending on which amount is lower.
D)either the fair value of the consideration given or the fair value of the asset received, depending on which the firms can more reliably measure.
E)either the fair value of the consideration given or the fair value of the asset received, depending on which amount is higher.

Question

Quizplus · Accepted Answer

The acquisition cost of assets acquired by exchanging an asset other than cash or by issuing common stock is determined as the fair value of the consideration given or the fair value of the asset received, depending on which the firms can more reliably measure. This option is chosen because the objective of determining acquisition cost is to capture the economic substance of the exchange, regardless of whether it is a cash payment or non-cash payment. Therefore, the cost should be based on the most reliable measurement available, either the fair value of the asset received or the consideration given, depending on which can be more reliably determined.

Firms Sometimes Acquire Assets by Exchanging an Asset Other Than