Date: 06 - 12 - 2016
To: Jenny Taylor, president of Taylor Company
From: Kai Tow, CPA
Re: Case Assignment
Facts:
Taylor Company agreed to exchange 100,000 shares of stock in Taylor Company for land and a building with the market price for the land and building at $900,000 in order to expand the Company.
Issues:
1. Does a privately-held company transaction need to be held at fair value?
2. How to record the transaction of land and building for shares?
Conclusion:
1. According to paragraph #820-10-30-2 and #820-10-50-2F of the FASB Accounting Standards Codification (ASC), Taylor Company does not need to report the transaction at fair value since a nonpublic entity company does not have to sell assets at the prices they paid to acquire them:
Building and land $100,000
Company Shares @ $6.00 a share $100,000
2. According to paragraphs #820-10-30-2 and #820-10-50-2F of the FASB ASC the fair value cost does not need to be reported; however, the transaction does need to be reported in the financial statements (Income and Balance sheet).
Reasoning/Support:
1. The following paragraph of the FASB ASC provides authoritative guidance for determining Faire Value Measurement.
820-10-30-2 When an asset is acquired or a liability is assumed in an exchange transaction for that asset or liability, the transaction price is the price paid to acquire the asset or received to assume the liability (an entry price). In contrast, the fair value of the asset or liability is the price that would be received to sell the asset or paid to transfer the liability (an exit price). Entities do not necessarily sell assets at the prices paid to acquire them. Similarly, entities do not necessarily transfer liabilities at the prices received to assume them.

2. Here are pertinent paragraphs from the FASB ASC providing authoritative guidance for reporting fair