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IAS 16 – Recognition of insurance recoveries (new)

Date recorded:

The Committee received a request to clarify the timing of recognition of compensation for insured property, plant and equipment (PPE) that has been impaired or lost (for example, as a result of a natural disaster). The recognition requirements for this type of compensation are in paragraph 65 of IAS 16 Property, Plant and Equipment. However, the submission notes that it is unclear at what moment this compensation 'becomes receivable' according to this paragraph such that it can be recognised.

The majority of the Committee saw the wording 'becomes receivable' to be a generally recognised term under IFRSs. Thus, they preferred to issue a rejection notice under the view that clarifying guidance is not required.

However, a few Committee members found that the guidance as currently written requires judgement, and they preferred to amend wording as part of an Annual Improvement project. Possible amendment language suggested by a Committee member included changing 'becomes receivable' to 'right to receive compensation' in the recognition of compensation from third parties for items of PPE. These Committee members expressed a desire not to reference 'insured losses' in the recognition criteria given that the scope of paragraph 65 of IAS 16 is not limited to insured property.

Following deliberations, Committee members tentatively decided not to add this issue to their agenda based on the clarity of current guidance (as 'becomes receivable' is thought to be normal accounting terminology which is understood in practice).

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