Financial Accounting Series

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Effective Date and Transition7. The provisions of this Statement shall be effective for nonmonetary asset exchangesoccurring in fiscal periods beginning after June 15, 2005. Earlier application ispermitted for nonmonetary asset exchanges occurring in fiscal periods beginning afterthe date this Statement is issued. The provisions of this Statement shall be appliedprospectively.The provisions of this Statement neednot be applied to immaterial items.This Statement was adopted by the unanimous vote of the seven members of theFinancial Accounting Standards Board:Robert H. Herz, ChairmanGeorge J. BatavickG. Michael CroochGary S. SchienemanKatherine SchipperLeslie F. SeidmanEdward W. Trott8
AppendixBACKGROUND INFORMATION AND BASIS FOR CONCLUSIONSIntroductionA1. This appendix summarizes considerations that Board members deemed significantin reaching the conclusions in this Statement. It includes reasons for accepting certainapproaches and rejecting others. Individual Board members gave greater weight tosome factors than to others.Background InformationA2. In September 2002, the FASB and the International Accounting Standards Board(IASB) (collectively, the Boards) committed to a broad effort to improve internationalcomparability of financial reporting by working toward development of a single set ofhigh-quality accounting standards. As part of that effort, the Boards jointly undertooka short-term project to eliminate certain narrow differences between the accountingpronouncements issued by the IASB and its predecessor and the accounting pronouncementsissued by the FASB and its predecessors. Both Boards agreed to limit the scopeof the short-term project to issues for which (a) the Boards’ respective accountingpronouncements were different; (b) convergence to a high-quality solution wouldappear to be achievable in the short-term, usually by selecting between the existingstandards of either the FASB or the IASB; and (c) the issue was not within the scopeof other projects on the current agendas of either Board. The measurement basis ofcertain nonmonetary asset exchanges is one such difference that the FASB decidedshould be addressed in the short-term convergence project.A3. In May 2002, the IASB issued an Exposure Draft, Improvements to InternationalAccounting Standards, which, among other things, proposed changing aspects of theaccounting for nonmonetary exchanges of assets in IAS 16, Property, Plant andEquipment, and IAS 38, Intangible Assets. The guidance in those two accountingstandards, as in Opinion 29, is based on the principle that nonmonetary exchangesshould be measured on the basis of the fair values of the assets exchanged. Also likeOpinion 29, those two standards contained an exception to that basic principle forexchanges of similar productive assets. The IASB’s Exposure Draft proposed eliminatingthe “similar productive assets” exception. After considering comments receivedfrom respondents on that Exposure Draft, the IASB affirmed its decision to eliminatethat exception with the added proviso that exchanges lacking commercial substance donot qualify for recognition at fair value. In October 2002, the FASB added a project to9
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Page 3 and 4: SummaryThe guidance in APB Opinion
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Page 7 and 8: Statement of Financial Accounting S
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Page 19 and 20: eliminated, the Board affirmed its
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Financial Accounting Series

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