Final answer:
Accounting recognition of a gain on a nonmonetary exchange of plant assets is not given except when the exchange lacks commercial substance.
Step-by-step explanation:
In accounting, recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets, except when the exchange lacks commercial substance. Commercial substance refers to when the economic position of the company changes as a result of the exchange. If the exchange involves cash, similar fair values, or a depreciable life mismatch, recognition of the gain is still allowed.
The student's question pertains to the conditions when accounting recognition of a gain is not given on a nonmonetary exchange of plant assets. In accordance with accounting principles, recognition of gain is generally not provided except when the exchange lacks commercial substance. An exchange has commercial substance when the entity's future cash flows are expected to change significantly because of the transaction. In other cases, such as when there is cash involved, similar fair values, or a depreciable life mismatch, accounting standards require recognition of the gain from the exchange.