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IFRS for SMEs - Transition requirements for the revaluation option for property, plant and equipment (‘PPE’)

Date recorded:

The staff recommendation set out in the agenda paper was that the IASB should amend the transition provisions to permit prospective application of the revaluation model for PPE if an entity changed its accounting policy for any classes of PPE under the amendments to the IFRS for SMEs

The Senior Technical Manager introduced the session and highlighted the fact that subsequent to the agenda paper being prepared, the staff had spoken with several IASB members about whether requiring prospective application from the beginning of the period in which the amendments were applied would be a better option.  She noted that the staff were now leaning towards this position, and invited the IASB members to comment. 

One IASB member noted that she agreed with amending the recommendation to require prospective application, and observed that historically the IASB had always been very careful when there was a change to fair value measurement to require prospective application because of the risk of hindsight.

Another IASB member also agreed with amending the recommendation, and noted that in permitting prospective application, the IASB would be introducing an option into the IFRS for SMEs, and that having an option on an option would create the kind of complexity the IASB was trying to avoid in the SME standards.

All fourteen IASB members voted in favour of the revised staff recommendation to require prospective application of the option to use the revaluation model from the beginning of the period in which the entity first adopts the amendments.

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