IAS 16 — Clarification on classification of servicing equipment as inventory or property, plant, and equipment
The Committee considered a request for improvement of IAS 16 Property, Plant and Equipment with respect to servicing equipment and classification as property, plant and equipment (PP&E) or inventory. The constituent referring the issue to the IASB had observed that of IAS 16.8 is unclear with respect to the classification of servicing equipment as PP&E or inventory. The confusion arises from a perceived contradiction in the way servicing equipment is addressed in the paragraph.
After a short debate, the Committee agreed to propose an Annual Improvement amendment to IAS 16.8 to state that 'major spare parts, stand-by equipment and servicing equipment' qualify as PP&E when they are expected to be used during more than one annual period. The amendment will also propose deleting the last sentence of the same paragraph.
