If an exchange lacks commercial substance and a gain results, under GAAP the gain must be deferred by reducing the cost of the asset.

Question

Quizplus · Accepted Answer

According to GAAP, if an exchange lacks commercial substance, any gain that results must be deferred by reducing the cost of the asset received in the exchange. This is known as the cost deferral method. Therefore, the statement is true.

If an Exchange Lacks Commercial Substance and a Gain Results