If an exchange of assets lacks commercial substance, then no gain or loss on the exchange is recognized.

Question

Quizplus · Accepted Answer

This statement is true according to the principle of substance over form in accounting. If an exchange of assets is simply a shuffling of assets with no significant economic impact, then recognizing a gain or loss on the transaction would not accurately reflect the financial reality of the situation. Therefore, no gain or loss is recognized in such cases.

If an Exchange of Assets Lacks Commercial Substance, Then No