(11) NON-MONETARY TRANSACTION
On August 1, 2009, we entered into a subscription and asset sale agreement with Hua Hui. Under the terms of the Agreement, we received from Hua Hui the commercial income rights to 10,000 square meters to a 17 story apartment building in the Huadun Changde International Hotel’s Apartment Complex located in the city of Changde, Hunan Province (“Project”). The Project is currently under development by Changde Hua Hui. In exchange, we agreed to issue to Hua Hui 2,774,392 shares of our common stock. As additional consideration, we transferred to Hua Hui all of our shares of the GlobStream Technology Inc., certain assets of both SNMTS and CFCD and certain assets of the Company.
According to ASC 845-10-S99, transfers of non-monetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the entity’s initial public offering normally should be recorded at the transferors' historical cost basis determined under GAAP. In this transaction, Hua Hui became the controlling shareholder of the Company after it transferred the commercial income rights to the Company. Therefore, the accounting principles in ASC 845-10-S99 were followed and the Company recorded the rights at its historical cost basis, which was internally developed and had zero basis.
According to ASC 845-10-30, the accounting for non-monetary transactions should be based on the fair values of the assets (or services) involved, which is the same basis as that used in monetary transactions. Thus, the cost of a non-monetary asset acquired in exchange for another non-monetary asset is the fair value of the asset surrendered to obtain it, and a gain or loss shall be recognized on the exchange. The fair value of the asset received shall be used to measure the cost if it is more clearly evident than the fair value of the asset surrendered. Similarly, a non-monetary asset received in a nonreciprocal transfer shall be recorded at the fair value of the asset received. A transfer of a non-monetary asset to a stockholder or to another entity in a nonreciprocal transfer shall be recorded at the fair value of the asset transferred and a gain or loss shall be recognized on the disposition of the asset. We recorded the disposal of the subsidiaries and assets at fair value. As the result of the transaction with Hua Hui, we experienced a loss on disposal of the above mentioned assets of $1,345,688 in fiscal year 2009.