FAF3
Syllabus D. Recording Transactions And Events D4. Tangible non-current assets.

D4f. Profits or losses on disposal 6 / 9

Syllabus D4f)

Calculate and record profits or losses on disposal of non-current assets in the statement of profit or loss including part exchange transactions.

Part exchange allowance

Instead of receiving sales proceeds as cash, a part exchange allowance could be offered against the cost of a replacement asset:

Dr New asset cost
Cr Disposal account

IAS 16 states that the cost of an item obtained through part exchange is the fair value of the asset received.

The part exchange allowance takes the place of proceeds in the disposals account.