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IAS 16/IAS 38 — Acceptable methods of depreciation and amortisation


During 2011, the IFRS Interpretations Committee considered a constituent request to clarify the meaning of the term 'consumption of the expected future economic benefits embodied in the asset' when determining the appropriate amortisation method for intangible assets under IAS 38 Intangible Assets. The specific request related to the amortisation of service concession arrangements within the scope of IFRIC 12 Service Concession Arrangements.

The Committee noted that even though the selection of an amortisation methodology involves the use of judgement, a revenue-based method is not considered to be an appropriate manifestation of consumption. This is because revenue represents the generation of expected economic benefits rather than the consumption of economic benefits. Accordingly, the Committee decided to recommend an amendment to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (rather than IFRIC 12) as part of the annual improvements process.

In October 2012, the IASB decided to expose the proposals on IAS 16 and IAS 38 as a separate exposure draft, rather than as part of the 2011-2013 cycle of annual improvements, partially on the basis of concerns noted by the Due Process Oversight Committee that the proposed amendments to IAS 16 and IAS 38 regarding revenue-based depreciation may not meet the annual improvements criteria.


Current status of the project

This project has been completed.  The IASB issued Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) on 12 May 2014.


Project milestones

April 2012 IASB agrees to propose amendments to IAS 16 and IAS 38 as part of the annual improvements process
October 2012 IASB decides to issue a separate exposure draft on revenue based depreciation Expected in the fourth quarter of 2012
4 December 2012 ED/2012/5 Clarification of Acceptable Methods of Depreciation and Amortisation (Proposed Amendments to IAS 16 and IAS 38) published Comment deadline 2 April 2013
12 May 2014 Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) issued
Effective for annual periods beginning on or after 1 January 2016

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