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IAS 16 and IAS 2 – Accounting for core inventories

Date recorded:

The Technical Manager introduced the agenda paper by saying that it concerned the comments received on the tentative agenda decision. Of the four respondents, two agreed with the tentative agenda decision. One respondent disagreed with the reference in the tentative agenda decision that there was no diversity in practice. They would prefer the rationale to be that the issue was too broad. The submitter of the issue expressed disagreement in the fourth comment letter and recommended adding the issue to the Committee’s agenda.

The Technical Manager recommended finalising the tentative agenda decision with the amendment that the issue was too broad as suggested by one of the respondents.

The Chairman wondered whether the Committee was comfortable saying that the issue of distinction between inventory and property, plant and equipment was too broad for it to address. The ESMA representative shared those concerns.

Two Committee members expressed their disagreement with the tentative agenda decision and proposed to take the issue onto the Committee’s agenda.

The Chairman asked the Committee whether they wanted to perform further analysis to better articulate the differences in practice. Five of the 14 members voted in favour. He then asked who preferred stopping the project. Nine members voted for stopping.

The Chairman suggested articulating the cost benefit problem the Committee saw with this issue as further analysis would require extensive work. He asked if any of the Committee members objected to including that in the tentative agenda decision.  Two Committee members objected.  One of those members said that he disagreed with the amendment as it suggested that the Committee rejected items because it would require extensive work. The Chairman disagreed and replied that one of the agenda criteria was whether an issue could be resolved in a reasonable amount of time with the resources given. The Committee member said that he would not disagree if that was the wording in the final agenda decision. The Chairman concluded that either way the wording in the staff proposal needed to be amended as the scope was very clear and not too broad. The SEC representative was concerned about the diversity between industries on that matter and proposed to perform outreach on some (instead of all) industries. The Director of Implementation Activities replied that in his view it was different accounting instead of diversity as the fact patterns were different. The Senior Director for Technical Activities supported that and said that there was no evidence that similar economic circumstances were accounted for differently.

The Chairman asked if any member, except the two who would like to continue the project, objected to draft the agenda decision along those lines. One of those two Committee members who had objected before said that he still did not see a valid reason for not taking the project onto the agenda and emphasised further analysis would be required. The Chairman acknowledged that but concluded that the wording would be revised as proposed by the Senior Director for Technical Activities.

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