The Ministry of Finance ("MOF") has recently issued the Accounting Standards for Business Enterprises No.7 – Exchange of Nonmonetary Assets (the "Standards"), with effect from June 10, 2019.
The Standards expressly state that an exchange of nonmonetary assets refers to a swap of nonmonetary assets, such as fixed assets, intangible assets, investment-oriented property and long-term equity investment, between two entities. The Standards state that the accounting for an exchange of nonmonetary assets should be based on the fair values of the assets exchanged, if two requirements that "the exchange must have commercial substance" and "the fair value of the received or transferred asset is reliably measurable" are fulfilled. However, if an exchange of nonmonetary assets does not meet the conditions stated in Article 6 of the Standards, the accounting should be based on their book values. Moreover, the Standards provide that an enterprise shall disclose in the annotation five types of information about an exchange of nonmonetary assets, including "whether the exchange of nonmonetary assets has commercial substance, and why?".