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Clarification of Acceptable Methods of Depreciation and Amortization (Amendments to IAS 16 and IAS 38) [Completed]

Effective date:  Annual periods beginning on or after January 1, 2016.  Earlier adoption permitted.

Transitional provisions:

To be applied prospectively, effective for annual periods beginning on or after January 1, 2016.  Earlier adoption is permitted.

Last updated:

May 2016

Overview

In issuing the amendments, the IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset.  This presumption can only be rebutted in two limited circumstances: (a) the intangible asset is expressed as a measure of revenue and (b) the revenue and consumption of the intangible asset are highly correlated.

Other developments

May 2014

On May 12, 2014, the IASB issued Amendments to IAS 16, Property, Plant and Equipment, and IAS 38, Intangible Assets: Clarification of Acceptable Methods of Depreciation and Amortization.

 

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.