FAS No. 153

The new FAS 153 changes the accounting rules for nonmonetary exchangesof assets. Previously, the accounting rule for "similar" assets was fairly close to the tax rule for Section 1031 exchanges. The new rule in FAS 153 refers to exchanges with "commercial substance" rather than on the similar/dissimilar distinction. A gain does not have to be recognized on those exchanges that are without commercial substance. This change in the rule was made in order to make the FASB Statement more consistent with the International standard (the so-called convergence). While it does make the rules more consistent with International standards, it makes them LESS consistent with tax rules. The result--an additional book-tax difference that may give rise to deferred tax calculations.
-Curt Norton