ACCOUNTING FOR INVOLUNTARY CONVERSIONS Introduction
1. If an asset is involuntarily destroyed, stolen, expropri-ated, or taken by right of eminent domain, the event is referred to as an involuntary conversion. Involuntary conver-sions can occur in the following ways:
• Nonmonetary to nonmonetary (trade of assets); for example, the federal government exchanges timberland with a company to develop a park.
• Nonmonetary to monetary, with no intent by the owner to reinvest in similar productive assets;1 for example, the insurance proceeds from the loss of a building due to a fire are not reinvested in a building because the company has excess capacity.
• Nonmonetary to monetary, with intent by the owner to reinvest in similar productive assets; for example, the owner intends to invest the insurance proceeds from the loss of a building due to a fire in a replacement building.
As defined, in APB Opinion 29, Accounting for Nonmonetary Transactions, paragraph 3, "Similar productive assets are productive assets that are of the same general type, that perform the same function or that are employed in the same line of business."
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