An exchange transaction is said to have commercial substance if the future cash flows change as a result of the transaction.

Question

Quizplus · Accepted Answer

This statement is true. A transaction has commercial substance if it affects the cash flows in the future. In other words, it provides economic benefits to the company that are expected to be realized over time. If a transaction has commercial substance, it is considered meaningful for accounting purposes and must be recognized in the financial statements.

An Exchange Transaction Is Said to Have Commercial Substance If