Nonmonetary Exchange F16-13b

Provide the two exceptions to book value reporting, when a transaction lacks commercial substance.

1. When a loss occurs, it is recognized in full, and the acquired asset is recorded at market value.
2. When a gain occurs and cash is received, a portion of the gain (see the 25% rule) may be recognized. The acquired asset is recorded at market value less than the portion of the gain unrecognized.