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Annual improvements 2010-2012 cycle — IAS 16 & 38

Date recorded:

The exposure draft was issued in May 2012; it aimed to clarify the requirements for the calculation of the accumulated depreciation / amortisation at the date of a revaluation when applying the revaluation method.

Both standards provide two different treatments for accumulated depreciation / amortisation at the date of revaluation. Accumulated depreciation / amortisation is treated in one of the following ways:

  1. restated proportionately with the change in the gross carrying amount of the asset, so that the carrying amount of the asset after revaluation equals its revalued amount (the gross approach); or
  2. eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset (the offset approach).

Practice differed in restating the accumulated depreciation when applying the gross approach (a) above. A submission received identified that a restatement of accumulated depreciation proportionate to the gross carrying amount is not possible in cases in which a residual value, the useful life or the depreciation method has been re-estimated before a revaluation.

The IC recommended that the IASB proceeded with the following amendments:

  1. to make clear in the Basis for Conclusions of IAS 16 and IAS 38 that accumulated depreciation / amortisation would not be able to be restated proportionately to the gross carrying amount in situations in which both the gross carrying amount and the carrying amount are revalued non-proportionately to each other; this is regardless of whether a re-estimation of the residual value, the useful life or the depreciation method occurs prior to revaluation
  2. the transition requirements should be changed so that:
    1. the proposed  amendments should be applied to all revaluations recognised in annual period beginning on or after the date of initial application of that amendment and in the immediately preceding annual period; and
    2. that an entity may also present adjusted comparative information for any earlier periods presented, but is not required to do so. If an entity presents unadjusted comparative information for any earlier periods, it shall clearly identify the information that has not been adjusted, state that it has been presented on a different basis and explain that basis.

The Board approved the revised proposed amendments to IAS 16 and IAS 38 for inclusion in the final Improvements to IFRSs.

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